As noted in the Decision Point at the beginning of this chapter, Google, Inc., announced a common

Question:

As noted in the Decision Point at the beginning of this chapter, Google, Inc., announced a common stock issue:

22,500,000 Shares

.001 Par Value Common Stock

Price $85 a share

The net proceeds before issue costs were $1.9 billion.

Given Google's successful track record as a start-up company, it is likely the company could have borrowed $1.9 billion in debt financing rather than issue common stock. Write a one-page business memorandum that takes either the position that

(1) Google should have issued debt at an interest rate of 8 percent or

(2) Google is correct in issuing common stock. Be sure to include in your presentation the effect of your alternative on the debt to equity ratio and return on equity?

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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...