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.
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