Capital Structure Recommendation
There are a number of capital structure options available to provide funding for a Canadian expansion. Capital structure strategy should have two main objectives: align with operating strategy and maximize total shareholder returns. Too much debt leverage can lead to credit default and insolvency. Capital financing using bonds has risks because some types of bonds may place responsibility on the company to provide dividends, which could impact shareholder earnings.
Capital structure is how operations and growth are financed. Different sources may be used; a combination of long term debt, short term debt, equity and preferred debt. Proper capital structure planning should strengthen the balance sheet, and increase the ability to face loss and change.
Based on this strategy, review and analysis of the options presented, the approach of 50% preferred and 50% common stock is recommended. This approach maximizes Earnings Per Share, EPS, or shareholder return. The chart below details the results of using the Canadian Budgeted Earnings, moderate forecast, and calculating a 5 year average Earnings Before Interest and Tax, EBIT, of $112,581. By plugging $112,581 into the Capital Structure Analysis, we see the 50/50 approach maximizes EPS, as detailed in the chart below. The Alternative Capital Resources and EPS chart below presents each option and the expected EPS. For financing using only bonds, the EPS is .045, using 20% bonds EPS is .052, using 40% bonds, EPS is .051 and using 60% bonds, EPS is .049. By using 50/50 stock, the EPS is .054, which is the highest EPS.

9% bonds only 50% preferred stock and 50% common stock 20% in 9% bonds and common stock 40% in 9% bonds and common stock 60% in 9% bonds and common stock
0.045 0.054 0.052 0.051 0.049

The 50/50 choice is the best alternative to strengthen Competition