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Capital Structure & Optimal capital structure

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Having previously identified the location of its Greenfield investment, Acme, a multi-billion 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.
Deliverable: 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. Your report should conclude with a recommendation of which alternative (or combination of alternatives) should be used to finance the overseas investment.

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Solution Summary

There is no one optimal capital structure which remains true forever with all the industry. The optimal capital structure depends on various factors such as the industry in which the company operates level of operation, diversification of operations and whether the industry is capital intensive or labor intensive. The various sources of finance which are available to Acme to finance the $500 million Greenfield project are summarized.
There are various sources of capital available for a company in order to meet the companies' financial needs. Manufacturing companies are typically capital intensive and require huge amount of capital investment.

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Capital Structure is a mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. ...

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  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
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