Final answer:
Issuing stock can provide large amounts of capital for expansion without the need to repay, but it dilutes ownership and adds regulatory complexities. Debt financing maintains control but comes with fixed repayment obligations. The choice between the two depends on the company's situation and growth strategy.
Step-by-step explanation:
When your corporation needs additional capital to fund an expansion, issuing stock has both advantages and disadvantages. The primary advantage is obtaining large amounts of capital without the need to repay it, which can be crucial for growth. Visibility in financial markets can be increased, and the firm does not commit to interest payments. However, issuing stock means selling company ownership, increasing responsibilities to shareholders and necessitating compliance with regulations like those of the SEC. There's also the cost of issuance to consider, which includes investment banker and attorney fees.
Debt financing, while keeping the company's ownership intact, obligates the firm to make regular interest payments regardless of their income. This could be burdensome if the company's revenues do not rise as expected. But, it does allow the firm to maintain complete control without interference from shareholders.
In conclusion, stock issuance can provide necessary funds for expansion but at the cost of ownership and taking on regulatory responsibilities. Debt remains a control-preserving option, but with the risk of rigid repayment schedules. The choice between issuing stock and incurring debt should be carefully weighed against the corporation's financial health, growth projections, and willingness to share control.