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    Funding the greenfield abroad - Greenfield Financing

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    Evaluating Performance

    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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    Abstract

    Multinational enterprise (MNE) funding can be complicated, demanding and exhausting. Acme is looking at funding a Greenfield investment abroad and per instructions, the author is to look at external sources of funding - only. The author did not consider internal sources of funding such as: accounts receivable and inventory reduction. The focus will be on external sources of funding like: equity offerings, lines of credit, mortgages and other long and short term loans.

    Conservative capital funding can be attained thru a variety of methods. As stated earlier, the MNE can look at external and internal sources. The external sources we will explore include: growth capital equity offerings, bank loans, lines of credit and mortgages. This paper will focus on debentures, lines of credit, long term loans and short term loans.

    Long Term Loans

    Any loan that is longer than one year is considered to be a long term loan. Long term loans call for collateral (responding for the loan) and can go (mature) for five, ten, twenty or even thirty years. Some of the disadvantages to these types of loans are the approval process, since they require a high level of thoroughness and have a high degree of difficulty. These types of loans are normally negotiated and settled with those lending institutions where the firm has established a relationship. This type of funding allows the firm to manage their short term resources without difficulty, and also allows them to "extend" the costs of the venture, especially if the firm was able to negotiate a fixed interest rate.
    Long term loans can also be arranged so that the interest rate floats or varies with the market. It's important to note that interests paid on these types of funding are tax deductible and will not decrease the company's equity. This kind of funding strategy will necessitate the firm's full cooperation and conscientious effort. The firm would need to know (before hand) how much monies they can afford to pay, and the type and frequency they are comfortable with; IE balloon payments, equal principal payments, annual or semi-annual. The biggest disadvantage of this type of funding is that it requires collateral, which will tight-up the company's ...

    Solution Summary

    Multinational enterprise (MNE) funding can be complicated, demanding and exhausting. Acme is looking at funding a Greenfield investment abroad and per instructions, the author is to look at external sources of funding - only. The author did not consider internal sources of funding such as: accounts receivable and inventory reduction. The focus will be on external sources of funding like: equity offerings, lines of credit, mortgages and other long and short term loans.

    $2.19

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