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
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?
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