In the year 2016 ABC company is in need of extra funds of $500,000. It has three
Question:
In the year 2016 ABC company is in need of extra funds of $500,000. It has three options( share capital, debt securities or a mix of both). Details of options available to the company are given in the following table:
description option 1 option 2 option 3
preferance share capital 5% 200000 100000
equity share capital @10 300000 150000 250000
debenture 5% 250000 250000
Net Income for 2016 before interest is $300,000, tax rate applicable for 2016 is 40%.
Required:
Based on the above Information, which option company should go with? Explain why?
Accounting What the Numbers Mean
ISBN: 978-0078025297
10th edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele