The Shepersky Corporation was authorized toissue 2,000,000 s

The Shepersky Corporation was authorized toissue 2,000,000 shares of $0.01 par value common stock and 200,000 shares of$50 par value, 10 percent preferred stock. To date, Shepersky has issued600,000 shares of common stock and no preferred stock. Shepersky iscontemplating the acquisition of a new piece of equipment and wants to issuestock to raise the $200,000 cash to finance its acquisition. The company istrying to decide whether to issue 10,000 shares of common stock or 4,000 sharesof preferred stock. Required: A. Describe how the issue of each type of stock would affectthe stockholders’ equity of Shepersky Corporation. B. If Shepersky generates about $3,600,000 of net income eachyear and the new machine can generate an additional $40,000 of after-taxincome, how will the earnings of the common shareholders be affected if: 1. Preferred stock is issued? 2. Common stock is issued?

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