Characteristics of the Various External Financing Alternatives
Not what you're looking for?
Having previously identified the location of its greenfield investment, Acme, a multi-billion dollar public MNE that is incorporated in the U.S., must next obtain external financing for its proposed overseas production facility. It has been estimated that the acquisition will cost $500M and all funds will be secured in the U.S.
Your job is to explain to this committee some of the financial aspects of this acquisition.
At the next steering committee meeting, you will provide a detailed presentation of the characteristics of the various external financing alternatives, including the advantages and disadvantages of each.
Which alternative (or combination of alternatives) should be used to finance the overseas investment?
Purchase this Solution
Solution Summary
Characteristics of the various external financing alternatives-Acme
Solution Preview
There are various financing routes available for Acme to invest in its expansion plans in India. For our analysis, since funds will be secured in the US only, we are ignoring alternative financing schemes available in the foreign country such as special grants provided by development banks to set up operations in these countries.
Let us discuss these options, their merits and demerits one by one:
1) Fund Raising via IPO/ Public issue: One of the most common routes to raise funds for these expansion plans is to offer shares of the company to public via Initial Public Offer, if the company is not publicly held right now or via issue of additional shares or rights issue, if the company is already publicly traded. The major advantage of going to the stock markets to raise funds is that substantial amount of funds can be raised via this route by diluting the equity of the company in proportionate amount. Further, the cost of raising funds via this route is cheaper as well due to no obligation to pay interest on capital as investors become shareholders of the company and not lenders. IPO's are especially attractive for new projects when there is optimism in the economy and ...
Education
- BCom, SGTB Khalsa College, University of Delhi
- MBA, Rochester Institute of Technology
Recent Feedback
- "Thank you. "
- "Thank you"
- "Thank you. I got 20/20 last week for my discussion you help me out with."
- "Thank you. Great Job. "
- "Thank you. Great Job. "
Purchase this Solution
Free BrainMass Quizzes
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.