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Essay / Research Paper Abstract
A 4 page review of the factors that entered into one company's decision to forgo million secured debt financing in favor of an equity financing strategy. Bibliography lists 3 sources.
Page Count:
4 pages (~225 words per page)
File: AM2_PPbusFinancing.rtf
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Unformatted sample text from the term paper:
secured debt financing in favor of an equity financing strategy has been heavily debated both inside the company and outside. With a workforce of 265 employees and even more
shareholders, the success or failure of that decision is sure to have long lasting impacts not just on company profitability and firm value but on employee and shareholder welfare as
well. Although this decision seems somewhat risky on the surface, an in depth analysis of AMSCs decision making logic reveals that it, is in fact, sound.
There are, of course, both advantages and disadvantages of AMSCs current strategy. Essentially money will be generated through the public sale of company
stock rather than through a combination of a five-year loan from three institutional investors, subordinated notes, and bank credit. This is feasible because company stock is on the upswing,
increasing 305 percent in the first eight months of 2003 alone (Esposito, 2003). In addition, revenue of Fiscal Year 2003 was expected to more than double and the company
was a three months ahead in its contractual commitment with the U.S. Navy (Esposito, 2003). A final critical factor in the companys decision to go public with its stocks
rather than relying on debt financing was that their products had been placed in the limelight by, what to the company at least waw a fortuitous event. That even
was the Northwest Blackout that, in addition to cutting the power of millions of users, also brought the need for an enhanced power grid to the public consciousness.
The Northwest Blackout obviously increased demand for AMSCs products. The Blackout thus had the potentioal to heighten the revenue that could be
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