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Safety Systems needs $2,000,000 to expand their production capacity. They can either borrow the full...

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Finance

Safety Systems needs $2,000,000 to expand their production capacity. They can either borrow the full $2,000,000 from the bank at 6% interest (Plan A), or they can issue 50,000 preferred shares for $40 each (Plan B). The preferred shares would pay an annual dividend of $1.50 per share. Assuming that the company has an effective tax rate 30%, calculate the annual after tax cost (in dollars) of each plan. [Format: dollar amount, no $ sign, no commas, no decimals]

Required:

1. Plan A: "After-tax" cost: $ Answer

2. Plan B: "After-tax" cost: $ Answer

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