Share
Explore BrainMass

Multinational Corporation

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.

Solution Preview

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.

Please submit your assignment
The financing of acquisition has several important financial implications. If the acquisition is financed from the internal funds of ACME, there will be a seamless acquisition of the Greenfield investment but there will be a cash outflow of $500 million. The payment of this money will cause a severe strain on the liquidity of ACME and can cause an unwanted working capital crisis in the company. Because of these reasons we seek external sources of finance for the acquisition.

One of the external sources of finance is bank/institution loan for financing the acquisition. There are several advantages of financing through bank loans. First the financing is fast. A bank loan for an acquisition can be obtained almost immediately. Next, the finance can be secured with the property owned by the ...

Solution Summary

This answer provides you an excellent discussion on Multinational Corporation

$2.19