Stockholders’ Equity:Stockholders equity is the amount of capital that is given by its shareholders, donated capital, operational earnings, minus any dividends issued. Stockholders’ Equity is reported on thebalance sheet and calculated as: Total assets – total liabilities = stockholders’ equity (Bragg & Bragg, 2018). The company’s goals are to expand and expects this expansion will require an additional $1,000,000.00 and generate an additional $600,000.00 of after-tax profit. They have
three options that they are willing to choose from for the expansion. The first option is issuing anadditional $1,000,000.00 of 10%, 100-Par convertible preferred stock. The issuance of this stock will increase stockholders’ equity. It will also have a dividend payout of $100,000.00. This dividend will have to deducted from the additional $600,000 that will be generated after tax profit which leaves $500,000 in earnings. This will increase the Earnings per share for the year. The second option is to issue an additional $1,000,000.00 of 8% convertible bonds. This option will have an interest expense of $80,000. This will be deducted from the additional $600,000.00 that could be generated thus leaving $520,000.00 in capital. Convertible bonds are a bond that can be converted to common stock and have features of debt and equity (Bragg &Bragg, 2018).
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