Answered

Looking for trustworthy answers? Westonci.ca is the ultimate Q&A platform where experts share their knowledge on various topics. Discover a wealth of knowledge from experts across different disciplines on our comprehensive Q&A platform. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently.

Penny Arcades, Inc., is trying to decide between the following two alternatives to finance its new $28 million gaming center: a. Issue $28 million of 6% bonds at face amount. b. Issue 1 million shares of common stock for $28 per share. 2. Which alternative results in the highest earnings per share

Sagot :

anthougo

Answer:

Penny Arcades, |nc.

a. Issue $28 million of 6% bonds at face amount.

Explanation:

Alternative A will surely result in higher earnings per share than Alternative B.  It has been established that some financial leverage enables the stockholders to earn more per share.  This is not a debatable issue.  The hard work lies with the corporation's ability to find the debtholders that can finance its activities and assets.  This means that the stockholders of Penny Arcades, Inc. will be at a much more financial advantage if they can find creditors to lend it the $28 million for the gaming center than making the finance available themselves.

Thank you for your visit. We are dedicated to helping you find the information you need, whenever you need it. Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Discover more at Westonci.ca. Return for the latest expert answers and updates on various topics.