Broad Ridge Corporation has the following capital structure at present. Sources Current Liabilities $48,000 Long-Term loans $200,000 Common Stock (1$ par) $50,000 Retained Earnings $165,000 Stockholders...

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Finance

Broad Ridge Corporation has thefollowing capital structure at present.
Sources
Current Liabilities
$48,000
Long-Term loans
$200,000
Common Stock (1$ par)
$50,000
Retained Earnings
$165,000
Stockholders Equity and Liabilities
$463,000
The firm needs additional funds of$175,000 to finance an expansion plan. It is evaluating raisingthis capital using any one of the following options.
Issue common stock at a price of $35 each
Issue preferred stock of $200 at par each with a dividend rateof 8%.
Issue 10-year bonds of $10,000 at par each with an interestrate of 8%,
Required: Discuss theimpact of each of these options on the capital structure of thecompany

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ANSWER Sources Amount Current Liabilities 48000 LongTerm loans 200000 Common Stock 1 par 50000 Retained Earnings 165000 Stockholders Equity and Liabilities 463000 a Effect of issue of equity shares In the case of equity share issuing Company stake will be diluted But See Answer

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Broad Ridge Corporation has the following capital structure at present. Sources Current Liabilities $48,000 Long-Term loans $200,000 Common Stock (1$ par) $50,000 Retained Earnings $165,000 Stockholders...

90.2K

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Finance

Answer & Explanation Solved by verified expert

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Sources
Current Liabilities	$48,000
Long-Term loans	$200,000
Common Stock (1$ par)	$50,000
Retained Earnings	$165,000
Stockholders Equity and Liabilities	$463,000