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    What are some examples of sources of capital available to corporations? Describe how a corporation raises short term and long term capital through the US financial system.

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    The capital funding of a company is made up of two components: debt and equity. Various Options of raising long finances:

    1. Issue of Equity Shares
    Equity can be raised either by private placement or by public. Intel has got strong track record; thus it can use this route to raise money. It has following features:

    Advantages of raising shares
    Permanent Capital: It need not be paid back
    Borrowing Base: It can be used to trade on equity
    Dividend Payment Discretion: The payment of dividend is in the hands of management

    Cost: It is more costly than debt
    Earnings Dilution: It involves reduction in EPS.
    Ownership Dilution: It involve sharing of ownership
    (Pandey, IM)

    It is a fixed income (debt) instrument issued for a period of more than one year with the purpose of raising capital. The central or state government, corporations and similar institutions sell bonds. A bond is generally a promise to repay the principal along with fixed rate of interest on a specified date, called as the maturity date.
    Less Costly
    No ownership Dilution
    Fixed payment of interest
    Reduced real obligation
    Obligatory Payment
    Financial Risk
    Cash outflows
    Restricted Covenants

    Issue Convertible Debenture
    It is issuing of convertible debentures to which will be convertible into equity after few years. It involves selling of ordinary shares in future at a higher price.
    Avoiding immediate dilution of earnings.
    Using low cost capital initially.

    Convertible warrants

    A warrant entitles the purchaser to buy a fixed number of ordinary shares at a particular price during a specified time period. It is similar to an American call option.

    Sweetening Debt
    Deferred Equity Financing
    Cash Inflow in Future

    Zero-Interest Debentures
    ZID or zero coupon bonds or deep discount bonds do not carry an explicit rate of ...

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