How many shares would you need to sell

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Reference no: EM133735266

Homework: Financing with Debt and Anticipated Cost of Debt Essay

How to understand the Module

The company you work for is considering building a new warehouse and manufacturing facility. The cost of the new buildings will be $6.9 million. Your manager wants you to decide how the company should finance the new building. You have TWO choices - You MUST analyze one or the other.

I. Finance the construction with debt.

1. list the type of debtyou would encourage the company to undertake and

2. Compute what the anticipated cost of that debtwould be. Incorporate current commercial interest rates. The company currently has a double AA credit rating.

3. List the advantages and disadvantagesof securing a loan from your local financial institution.

4. Include a discussion of the advantages and disadvantages of securing funds (debt or equity) from an Angel investor vs. a more traditional source.

II. Finance the construction with equity.

1. Decide how much equityyou will need to surrender to acquire the needed funds. Your company currently has 4 million shares outstanding and carries an estimated value of $24 per share.

a. How many shares would you need to sell?
b. Who would you sell them to?
c. Is this realistic considering the current size of the company?
d. What are the issues with giving up this much control of your company?

2. Include a discussion of the advantages and disadvantages of securing funds (debt or equity) from an Angel investor vs. a more traditional source or IPO.

Reference no: EM133735266

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