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Common stock financing is often considered the safest form of financing, as the issuing firm is under no obligation to pay dividends. Owners of common shares assume this uncertainty in the hope of favorable returns. Debt financing, assuming reasonable debt levels and good credit, is often the least expensive form of capital. This is because owners of bonds have legally enforceable claim on company assets, and thus require a lower rate of return. Plus, interest payments are tax deductible. Then we have preferred stock financing. Owners of preferred stock do not enjoy the same upside as common shareholders. Preferred shareholders claims on company assets are below the claims of creditors. As a result, owners of preferred shares demand higher rates of return than bondholders. Plus, the firm does not get to write off the dividends paid to preferred share holders, making the after tax cost of preferred shares even more expensive relative to bonds. Yet large corporations issue preferred shares all the time. In your opinion, why is this? What is the argument for issuing preferred shares? Why not create a capital structure made solely of bonds and common stock?
a company is considering replacing an old piece of machinery which cost 597500 and has 347500 of accumulated
bracewell company reported net income of 195000 for 2014. bracewell also reported depreciation expense of 40000 and a
computers r us is open seven days a week and has a daily payroll of 1750. employees are paid every friday december 31
dionne currently manufactures a subcomponent that is used in its main product. a supplier has offered to supply all the
Banks Billiard Company (BBC) issued $5 million in par value of bonds for $5.1 million. BBC incurred $200,000 in accounting fees and $50,000 in banking fees related to this transaction. What amounts should BBC record for the bonds upon issuance usi..
Storm paid no installation charges under the monthly payment plan but a $200 installation charge would have been incurred with a cash purchase. The amount to be capitalized as the cost of the machine on October 31, 2010 would be ?
Give some examples of up-front financing costs associated with residential mortgages. What rule can one apply to determine if a settlement (closing) cost should be included in the calculation of the effective borrowing costs?
As you discuss the tax-free sale with Emily and Richard, you present several accounting methods for the acquisition-cost basis, equity basis, or consolidated basis. In your presentation, include the following information:
Discuss how your understanding of the balance sheet and income statement may be applied to your current or future position.
topper corporation has 60000 shares of 1 par value common stock and 16000 shares of cumulative 7 100 par preferred
How do the provisions of SFAS No. 123(R) differ from the bill introduced by members of Congress (Dreier and Eshoo), which would require expensing for options issued to only the top five officers in a company? Which approach do you think would res..
the steps in the accounting cycle are listed in random order. fill in the blank next to each step to indicate its order
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