Kandahar Company had stockholders’ equity of $100 million in 2004 and long-term debt of $10 million. It had 10 million shares of common stock outstanding. Its interest expense was $800,000, and its...

Kandahar Company had stockholders’ equity of $100 million in 2004 and long-term debt of $10 million. It had 10 million shares of common stock outstanding. Its interest expense was $800,000, and its income tax rate was 30%. The company expects that its annual income before interest and taxes will run between $5 million and $15 million for the foreseeable future. The average is expected to be about $8 million. The company is considering issuing $25 million of additional debt to replace three million shares of its common stock. The additional debt would cost the company $3 million a year in interest. If you were asked by the company for advice on whether to issue the debt, what advice would you give?