- Financing an Expansion
After 12 years, your business is wildly successful, with multiple locations throughout the region. You are now ready to think really big. You want to purchase a huge competitor. (Note: You determine whether the competitor is a privately or publicly held company.) To expand, you will need additional capital from the debt or equity market or both.
Write a 5–7 page paper in which you:
- Use one of the valuation techniques identified in Chapters 11 and 12 to calculate the value of the competitor you wish to purchase. Note: You will have to make assumptions; however, your assumptions need to be rationally supported.
- Analyze the various financial tools available to you to determine which tools will be most helpful in assessing whether your company can afford to purchase the competitor. Support your response.
- Imagine you can indeed afford to purchase the competitor; however, you will need an additional $100 million.
- Examine the options available to you to finance the competitor through the debt market, recommending the best alternative as a result of your analysis. Provide support for your recommendation.
- Examine the options available to you to finance the competitor through the equity market, recommending the best alternative as a result of your analysis. Provide support for your recommendation.
- Conduct a cross-comparison of your debt and equity examinations to determine where to ideally obtain the additional $100 million funding needed to make the purchase and the approach that you would take to securing the funds. Provide support for your recommendation.
- This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.The specific course learning outcome associated with this assignment is:
- Determine whether to use the debt market or the equity market to obtain and secure funding for a major business purchase.