Reference no: EM133456459

Assignment:

Corporate Financial Structure

1. A corporation wishes to raise money to expand its operations.

a. Describe an advantage and a disadvantage to the corporation of using equity financing

b. Describe an advantage and a disadvantage of using debt financing to obtain funds.

c. Would your answer be different if the founders of the corporation wished to retain control of the corporation? Why or Why not?

2. ABC Inc., a manufacturing company, has 100,000 outstanding shares. One thousand shareholders, including Paul, have preferred stock that carries a right to annual cumulative dividends of $5 per share. Paul owns 100 shares. Callie, a common stockholder, also owns 100 shares of ABC Inc. stock.

a. The corporation has not been able to pay a dividend for two years but intends to do so this year in the amount of $1 per share of common stock. Describe Paul's and Callie's rights to this year's payment of dividends.

b. Generally speaking, which shareholders will vote in the election of directors to be held this year?

c. ABC is paying interest to its bondholders at the rate of 2.3 percent annually. The corporation issued bonds to Brad and Billie that were subject to a call right in favor of the corporation. The interest rates on the open market are currently 1.8 percent. Why would ABC wish to exercise its right to redeem the bonds?

d. If ABC redeems shares and places them in its treasury, will those shares have dividend and voting rights? Discuss.

e. ABC has set aside $400,000 to fund future operations. Are there any risks to the corporation in setting aside this fund of money? Why?

3. Access the website of the IRS and review Publication 542. (The search bar is very helpful here) (Find the Table of Contents - Accumulated Earning Tax) A C corporation engaged in accounting services has accumulated earnings of $150,000. Will this be subject to the accumulated earnings tax? Why or Why not?

4. Access the website for Amazon.com. Select "Investor Relations" and then "Corporate Governance." Review the corporate charter (Certificate of Incorporation). Describe Amazon's stock. (Article 4. Shares)

5. Access the SEC's website (Search bar) and review the Form 10-K filed for Alphabet Inc. on February 3, 2023.

a. What is the par value of its Class A common stock?

b. In Item 1 ("Business") review the information relating to the company's ongoing commitment to sustainability. In 2020, what was the amount of the company's issuance of sustainability bonds?

6. Access the SEC's website and review the Form 10-K for General Mills, Inc. filed on September 21, 2022. How many shares were held by the company in its treasury?

7. Access the SEC's website and review page 18 of the Form 10-K for Verizon Communications, Inc. filed on February 10, 2023.

a. What was the amount of outstanding unsecured indebtedness Verizon had as of December 31, 2022?

b. What was the amount of outstanding secured indebtedness Verizon had as of December 31, 2022?