Evaluating Alternative Investments Rob Lowe would like to invest $100,000 in Franklin Inc , which is offering common stock , preferred stock, and bonds on the open market The common stock has paid $1 per share in dividends for the past three years, and the company expects to be able to double the d...

1 Common stock dividends become an obligation of the company after they are declared Prior to the de ...

Evaluating Alternative Investments Rob Lowe would like to invest $100,000 in Franklin Inc., which is offering common

Question:

Evaluating Alternative Investments Rob Lowe would like to invest $100,000 in Franklin Inc., which is offering , preferred stock, and bonds on the open market. The has paid $1 per share in dividends for the past three years, and the company expects to be able to double the in the current year. The current market price of the is $10 per share. The preferred stock has an 8% rate. The bonds are selling at par with a 5% stated rate.

Required
1. Explain Franklin’s obligation to pay dividends or interest on each instrument.
2. Recommend one type of investment over the others to Rob and justify your reason.

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... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...