You are a consultant for Energy Company. It is a utility company. It is thinking about expanding its energy production by opening up a new plant. The owners are at looking at different options and have hired you to prepare a presentation for them with information on each of the following options for raising capital for this project:
• Issuing shares is one way of raising funds for capital expansion. Discuss the advantages and disadvantages of issuing common shares to raise funds for capital expansion.
• Issuing bonds is another way of raising funds for capital expansion. Discuss the advantages and disadvantages of issuing bonds to raise funds for capital expansion.
• What is the financial statement impact of issuing stock compared to issuing bonds? Explain how stock and bonds impact the calculation of debt-to-equity ratio.
• If they issue preferred stock instead of common stock, what is the impact on financial statements?