Here is the synopsis of our sample research paper on Capital Raising Options. Have the paper e-mailed to you 24/7/365.
Essay / Research Paper Abstract
This 9 page paper looks at the options available to a company wishing to raise capital. The paper compares the two options of equity and debt looking at the direct and indirect costs in the short and long-term as well as the non-financial issues such as shareholder satisfaction. The bibliography cites 15 sources.
Page Count:
9 pages (~225 words per page)
File: TS14_TEcapraise.rtf
Buy This Term Paper »
Unformatted sample text from the term paper:
the company wishes to raise a further ?100 million they will wish to assess the most appropriate source of funds. When considering the potential sources of funding the company will
want to consider the actual cost of the capital raised, the impact on the cost of capital as a whole for the company and the short and long-term impact of
their choice on the company. The main choices are debt and equity (Watts, 1995), debt will increase liabilities and commitments to regular outgoings whereas equity will dilute the existing shareholder
funds and may increase the amount to be paid out in dividends over a term longer than any long-term debt but will not increase liabilities (Elliott and Elliott, 2005). The
initial concern is likely to be that of cost. It is possible to estimate and compare the costs of both options. To estimate the cost if the funds are to
be raised through equity, such as a share issue we can use a Capital Asset Pricing Model (CAPM) as a guide. This was extension of the modern portfolio theory that
was introduced in 1964 by William Shape (lton, et al, 2006). The way in which it expands of the idea of the modern portfolio theory is in the way it
allows for specific and systematic risks in the returns expected by an investor (lton, et al, 2006). When we apply the CAPM there
is a simple formula, this is where E(R) is the rate of return that is expected on any single stock, r is the risk free investment rate, ERP is the
additional equity risk premium. The formula looks like this; E(R) = r + (ERP x beta ) (Elton, et al, 2006). If we us this we need to assume a
...