Question: The Melano Corporation was authorized to issue 1 000 000 shares of
The Melano Corporation was authorized to issue 1,000,000 shares of $ 1 par common stock and 100,000 shares of $ 100 par, 10 percent cumulative preferred stock. To date, Melano has issued 300,000 shares of common stock and no preferred stock. Melano is contemplating the acquisition of a new plant and wants to issue stock to raise the $ 1,000,000 cash to finance its acquisition. The company is trying to decide whether to issue 25,000 shares of common stock or 10,000 shares of preferred stock. Describe the advantages and disadvantages of issuing each type of stock.
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