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Randy's Restaurant: raise $15M in new capital. Discuss equity market options.

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(Mini Case) Randy's, a family-owned restaurant chain operating in Alabama, has grown to the point where expansion throughout the entire Southeast is feasible. The proposed expansion would require the firm to raise about $15 million in new capital. Because Randy's currently has a debt ratio of 50%, and also because the family members already have all their personal wealth invested in the company, the family would like to sell common stock to the public to raise the $15 million. However, the family does want to retain voting control. You have been asked to brief the family members on the issues involved by answering the following questions:

a. What agencies regulate securities markets?

b. How are start-up firms usually financed?

c. Differentiate between a private placement and a public offering.

d. Why would a company consider going public? What are some advantages and disadvantages?

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Solution Summary

The solution specifically addresses the regulatory questions and discusses the agencies involved. Several advantages and disadvantages of going public are briefly explained in the solution.

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a. What agencies regulate securities markets?
The bodies that regulate the securities markets include NASD & the New York Stock Exchange as well as the SEC (Securities and Exchange Commission). The SEC also regulates the overseas market as well.

b. How are start-up firms usually financed?
There are various alternatives here. Traditional financing (bank ...

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