SU Capital Structure Approach Using an Analysis of Debt v Equity Letter

I’m working on a management writing question and need an explanation to help me understand better.

1. CLIENT LETTER

   OVERVIEW

   ?Imagine that you are a certified public accountant (CPA) with a new client who needs an opinion on the most advantageous capital structure of a new corporation. Your client formed the corporation in question to provide technology to the medical profession to facilitate compliance with the Health Insurance Portability and Accountability Act (HIPAA). Your client is very excited by the ability to secure several significant contracts with enough capital.

   INSTRUCTIONS

   Use the Internet and Strayer Library to research the advantages and disadvantages of debt for capital formation versus equity for capital formation of a corporation. Prepare a formal letter to the client using as a guide the six-step tax research process in Chapter 1 that was demonstrated in Appendix A on page 7 of your textbook. Write a 1–2 page letter in which you:

   1. Compare the tax advantages of debt versus equity capital formation of the corporation for the client.
   2. Recommend to the client whether he or she should use debt or equity for capital formation of the new corporation, based on your research. Provide a rationale for the response.

   This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions. The specific course learning outcome associated with this assignment is:

   • Create a recommendation for a capital structure approach using an analysis of debt versus equity capital formation.?
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