To raise capital, corporate officers have two basic sources offunding from which to choose:...

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Accounting

To raise capital, corporate officers have two basic sources offunding from which to choose: (1) debt (i.e., issuing bonds, takingout a loan) or (2) equity (i.e., issuing more stock). What are thetrade-offs between these two very different sources of capital?Consider tax and nontax factors.

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Firstly Funds should be raised in way that would yeild a maximum return at minimum cost Finance can be chosen as a mix of debt and equity depending on the expected cash flow tax savings and financial leverage Let us consider each type of Finance in detail Debt financing The definition of debt financing is borrowing money from a lender with the promise of paying back the borrowed amount over a predetermined period of time plus interest Debt financiang has a fixed commitment on payment of debt and interest Interest payments are tax deductable and saves tax out flows Debt financing ususally See Answer

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In: AccountingTo raise capital, corporate officers have two basic sources offunding from which to choose: (1)...To raise capital, corporate officers have two basic sources offunding from which to choose: (1) debt (i.e., issuing bonds, takingout a loan) or (2) equity (i.e., issuing more stock). What are thetrade-offs between these two very different sources of capital?Consider tax and nontax factors.