Raise large sum of money in short period of time

Assignment Help Financial Management

Reference no: EM131617213

You manage the finances of a company looking for new investments to grow its portfolio. A small business owner approaches you with and opportunity: invest in his company and you have a 50% chance of seeing a return of $10,000 three years from now. Of course there is also a 50% chance that the small business fails and you see no return.

a. Assuming the interest rate is 4% and your company is risk-neutral (i.e. all it cares about is the expected value of the investment), what is the maximum of amount of your company’s money you are willing to give up today for the investment? Now your company is thinking about how best it can raise several million dollars to expand its capacity. No single bank is willing to loan your company that much money all at once. Your boss asks for your advice.

b. What other options does a company have to raise a large sum of money in a short period of time?

c. What are the advantages and disadvantages of each type of financing?

d. Which type of financing would you suggest for your company? Why?

Reference no: EM131617213

Questions Cloud

What is the arithmetic return for the stock : What is the arithmetic return for the stock? What is the geometric return for the stock?

Estimate the surface temperature of the cable : Thermal energy generated by the electrical resistance of a 5-mm-diameter and 4-m-long bare cable is dissipated to the surrounding air at 20°C.

Relationship in book-to-market and average monthly returns : What is the relationship between book-to-market and average monthly returns?

Specify the methods used to conduct the research : Specify the methods used to conduct the research. Provide the reader with the complete APA reference entry. Explain the contributions of the research.

Raise large sum of money in short period of time : What other options does a company have to raise a large sum of money in a short period of time?

Explain the circumstances and details of the federal case : Then, explain the circumstances and details of the federal case tracing the chronological events from lowest possible level to the U.S. Supreme Court.

Problem related to the heat loss : Water is boiling in a 12-cm-deep pan with an outer diameter of 25 cm that is placed on top of a stove. The ambient air and the surrounding surfaces.

Use the treasury bill yield at the risk-free rate : Why do we usually use the Treasury bill yield at the risk-free rate?

Economic scenarios before debt is issued-assuming no taxes : Calculate return on equity, ROE, under each of the three economic scenarios before any debt is issued, assuming no taxes.

User Account

All Pages