A large corporation hires you as a consultant. The firm has accumulated tax losses and it expects

Question:

A large corporation hires you as a consultant. The firm has accumulated tax losses and it expects to be in this position for a number of years. The firm needs a new distribution facility on the West Coast to service its West Coast customers more efficiently. The facility has an estimated cost of $ 10 million. The firm is considering three alternative plans. Under plan A, the firm can borrow the $ 10 million and purchase the facility. Under plan B, the firm can issue common stock to raise the $ 10 million and purchase the facility. Under plan C, the firm can lease the facility from the current owners. The firm asks you to prepare a brief report outlining the tax consequences of each plan. Your report should also contain your recommendation as to the most tax efficient plan.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...