Preferred versus Common Stock Rohnan Inc. needs to raise $500,000. It is considering two options: a. Issue

Question:

Preferred versus Rohnan Inc. needs to raise $500,000. It is considering two options:
a. Issue preferred stock, $100 par, 8%, cumulative, nonparticipating, callable at $110. The stock could be issued at par.
b. Issue common stock, $1 par, market $10. Currently, the company has 400,000 shares outstanding distributed equally in the hands of five owners. The company has never paid a dividend.

Required
Rohnan has asked you to consider both options and make a recommendation. It is equally concerned with cash flow and company control. Write your recommendations. Ethical Decision Making

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...