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Stock in Fresh Corporation is held equally by Clementine, Honeydew, and Pomegranate. Fresh Corporation seeks...

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Accounting

Stock in Fresh Corporation is held equally by Clementine, Honeydew, and Pomegranate. Fresh Corporation seeks additional capital to buy a valuable tract of land that will cost $6,000,000. Clementine, Honeydew, and Pomegranate propose to loan Fresh Corporation $2,000,000 each, taking from Fresh Corporation a $2,000,000 ten-year note with interest payable annually at five points above the prime rate. Fresh Corporation has current taxable income of $7,000,000.

Instructions: Explain briefly three issues related to whether this loan should be treated as debt or equity.

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