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Current economic condition, future growth, convertible securities, bankruptcy.

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1. Describe the current economic and financial condition we are facing today. How will the current economic and financial condition impact the future growth of businesses? If you were raising funds from outside (today) to support the growth of a company, why would you use warrants in debt financing. Explain how your financing strategy will increase the wealth of the stockholders.

2. Why do some companies issue convertible securities to raise funds to support the growth? How do these securities increase the value of the firm?

3. What is bankruptcy? What is the difference between liquidation and reorganization? What is the main benefit of reorganization? Identify and discuss the reasons for the selected firm's business failure and explain the company's reorganization strategies.

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Solution Summary

This solution discusses economic and financial conditions, security and bankruptcy.

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Answers:

1. If we look at the current economic and financial conditions we can find that the world economy is in a path to recovery from a deep recession. We can find the national deficit of United States has gone up to 1 trillion due to the recession. Major financial hubs got bankrupted due to credit crunch. But at present we can see some positive sign with stock exchange and the economy showing some good sign. The future growth of the business will mainly depend on the speed of recovery but due to the recession the growth rate in the future for business is expected to remain low until the economy recovers completely.

As we know that warrants are like call option it gives the right to the warrant ...

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