Brianna and Britney are two sisters opening a clothing store with no other competition within the area. Both Brianna and Britney believe they will gain great profits in the first year, providing them with the ability to sell franchises in the future. They can start the business as a partnership, however it is believed that cash flow will be an issue as they expand in the future, thus they feel as though a corporate form of the business is best. What are three advantages of choosing the corporate form of a business. Do you suggest that they issue preferred or common stock? State reasons for your answer.

Question

Brianna and Britney are two sisters opening a clothing store with no other competition within the area. Both Brianna and Britney believe they will gain great profits in the first year, providing them with the ability to sell franchises in the future. They can start the business as a partnership, however it is believed that cash flow will be an issue as they expand in the future, thus they feel as though a corporate form of the business is best.

  1. What are three advantages of choosing the corporate form of a business.
  2. Do you suggest that they issue preferred or common stock? State reasons for your answer.

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Finance

Corporate Finance

Related Finance Q&A

Find answers to questions asked by students like you.

Q: Suppose an individual makes an initial investment of $1400 in an account that earns 7.8%,compounded ...

A: Future value of a cashflow is the present value of the cashflow compunded at future date at specifie...

Q: Consider the one-factor APT. The variance of returns on the factor portfolio is 6%. The beta of a we...

A: Variance of returns on the well diversified portfolio ={(Beta)^2}*(Variance of returns on the factor...

Q: Dabble, Inc. has sales of $984,000 and cost of goods sold of $644,000. The firm had a beginning inve...

A: Day's Sales in Inventory = Ending Inventory / Cost of goods sold * 365 days     

Q: Tarheel Furniture Company is planning to establish a wholly owned subsidiary to manufacture upholste...

A: Financial statements are prepared at the year-end so that position and performance of the company ca...

Q: Computer stocks currently provide an expected rate of return of 19%. MBI, a large computer company, ...

A: Given: Expected rate is 19% Expected dividend is $2.6 Current price = $56

Q: This is an entrepreneurship question

A: Formulas: Quick ratio = Current assets - Inventory/Current liabilities. Current ratio = Current ass...

Q: For the investment situation below, identify the annual interest rate, the length of the investment ...

A: Given, rate =8% years = 10 

Q: Becky would like to be a millionaire in 40 years. How much would she need to invest quarterly in a s...

A: Given:

Q: investments in working capital by a firm:a. Are simply accounting entries and do not afffect NPV b. ...

A: Working capital is the amount required for the day to day activities for a business.

Q: International Finance (chapter 21) Question Explain how each of the following will affect the relati...

A: The exchange rate of every country has fluctuates by the import and export of that country. An Infla...

Q: Matthews Corporation has a beta of 1.2. The annualized market return yesterday was 13%, and the risk...

A: Return can be defined as the profit or interest earned by the investor on the investment, which incl...

Q: What sum of money must be deposited in a savings scholarship account to provide a scholarship of $33...

A: Effective annual rate is the rate which is compounded only once a year. If the interest rate is comp...

Q: Capital Budgeting   Assume you are evaluating two mutually exclusive projects, the cash flows of whi...

A: NPV profile is as below-

Q: At auction, 2-month T-bills were sold at a discount of 6.530%. What was the simple annual yield r?

A: Given,  time t = 2 months i.e. 2/12 = 1/6 Discount = 6.53% Let the face value be $100 Discount = $10...

Q: 

A: The percentage change analysis represents the change that occurs due to a change in the time period....

Q: Suppose that you borrow a loan of amount P from a bank at the end of month 3 and make  the monthly d...

A: Compound Interest formula: A=P(1+rn)nt A = the future value of loan P = the principal amount r = th...

Q: You are trying to pick the least-expensive car for your new delivery service. You have two choices: ...

A: Equivalent annual cost is annual cost of owning operating and maintaining the asset  Here cost is ex...

Q: The equipment has a delivered cost of $58,000. An additional $4,000 is required to install the new e...

A: Click to see the answer

Q: An investment in a lease offers returns of $1500 per month due at the beginning of each month for th...

A: Given interest rate is 8% compounded semi annually  So effective rate of interest = (1+0.08/2)^2 -1 ...

Q: When the share price series breaks through the moving average line from below, what would a technica...

A: Moving Averages are averages with little more extension Moving Average is Popular Technical Indicato...

Q: e of a share is currently $14, and you expect the marke ed 1-year holding-period return on Xyrong st...

A: Given information : Risk free rate (Rf) = 5.5%Expected market return (Rm) =13%Beta (β) = 2.9 Dividen...

Q: Leanor pays a total of $16.50 for every 6 shirts she has dry-cleaned. Which graph models a relations...

A: A 2-D graph represents different combinations of two variables, one on the x-axis and the other on t...

Q: MF Corp. has an ROE of 17% and a plowback ratio of 60%. The market capitalization rate is 14%.  a. I...

A: a) Growth rate (g) = ROE * plowback rate  g = 17 * 0.60 g = 10.20% D1 (Next year's dividend per shar...

Q: In order to create an endowment, which pays $100,000 per year, forever, how much money must be set a...

A: The provided information are: Cash payment (C) = $100000 Interest rate (r) = 10% = 0.10

Q: Suppose a state lottery prize of $8 million is to be paid in 5 payments of $1,600,000 each at theend...

A: Present value of the prize = P * {1-[1/(1+r)^n]/r} P = 1,600,000 n = no. of compounding period i.e. ...

Q: Pharmos Incorporated is a Pharmaceutical Company which is considering investing in a new production ...

A: Sorry to use Excel but Trust me the Solution  is very clear Projects viability can be checked using ...

Q: Calvin received bimonthly paychecks of $2007.25 last year. If 17.1% of his yearly income got withhel...

A: Withheld amount = Paycheck amount * % of withheld 

Q: In connection with surfacing a new highway, a contractor has a choice of two sites on which to set u...

A: Expenses: These are the costs incurred by the company that will decrease the company’s profits. Thes...

Q: Consider a bond paying an annual coupon of $70 with a face value of $1,000. Calculate the yield to m...

A: using financial calculator, N(time to maturity) =18 PV (Price of bond) = -1150 FMT (annual Coupon) =...

Q: I need help with a finance question

A: To complete this  we have to use the following formulas -   Cash Conversion cycle = Debtor's collect...

Q: Helo me fast...I will give good rating....

A: Loan is financial agreement where a person (lender) lends lump-sum money to other person (borrower) ...

Q: Revere College predicts that in 6 years it will take $150,000 to attend the college for four years. ...

A: Given information: Future value is $150,000 APR is 7% Number of years is 6

Q: Consider a single factor APT. Portfolio A has a beta of 2.0 and an expected return of 22%. Portfolio...

A: Capital Assets Pricing Model or CAPM is used to determine expected yield on a stock or portfolio. It...

Q: The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 4% per year in the f...

A: Click to see the answer

Q: Compute the discounted payback statistic for project C if the appropriate cost of capital is 7% and ...

A: Discounted Payback(PB) Period shows the time period in which present values(PV) of all cash inflows ...

Q: The Texas Rustler has total assets of $645,563 and an equity multiplier of 1.22. What is the debt-eq...

A: Debt-Equity Ratio or D/E Ratio shows proportion of total debt over owner’s equity in a company. It i...

Q: Capital Budgeting   Assume you are evaluating two mutually exclusive projects, the cash flows of whi...

A: The given data is -  Year 0 1 2 3 4 5 Cashflow -46800 -21600 43200 43200 43200 -28800 To fin...

Q: With the Covid-19 crisis, the Starlight Company announced that it would stop paying dividends for th...

A: As per Dividend Discount model, P4 = D4*(1+g) /(ke-g) Where D4 = $2 g = growth rate i.e. 1% ke = cos...

Q: Fletcher’s Company’s current stock price is $36, and its last dividend was $2.40.  In view of Fletch...

A: Given: Current stock price = $36 last dividend = $2.4 Required return = 12%  

Q: What is the price of zero coupon bond with 8 years of maturity left and a current yield to maturity ...

A: A financial instrument that does not affect the ownership of the common shareholders or management o...

Q: 3. How does operating leverage impact the operating risk and profit levels of a company?

A: Operating leverage measures the percentage increase in operating income which is a result of change ...

Q: Modern Artifacts can produce keepsakes that will be sold for $100 each. Nondepreciation fixed costs ...

A: a) Accounting Break even level of sales = (Fixed Costs + Depreciation) / Contribution per unit Depre...