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Essay / Research Paper Abstract
A 4 page continuation of examination of the choices that Acme must make before it expands internationally. There are a number of ways that Acme can finance its greenfield investment in globalization. The choices the company makes can have direct effect on the total value of the firm, so Acme should choose carefully the forms of financing it chooses for itself. The paper discusses optimum capital structure, bonds and long- and short-term loans. Bibliography lists 6 sources.
Page Count:
4 pages (~225 words per page)
File: CC6_KSfinIntlChoic.rtf
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Unformatted sample text from the term paper:
a number of ways that Acme can finance its greenfield investment in globalization. The choices the company makes can have direct effect on the total value of the firm,
so Acme should choose carefully the forms of financing it chooses for itself. Optimal Capital Structure The optimal capital structure is that which
"maximizes the value of the firm" (Corporate Finance, 2004). The "total value of the firm is the sum of the value of its equity and the value of its
debt" (Corporate Finance, 2004). Debt can be in several forms, however, each of which needs to be carefully managed to provide maximum benefit to the company.
Always, the least costly form of outside capital is that provided by investors as they purchase stock in the company. It has already been determined
that Acme will need to secure $500 million entirely through outside financing sources, however. The market capitalization provided by its investors is not available for the expansion project.
This leaves two broad options available to the company. "There are two sources of cash: reducing assets or increasing liabilities or equity" (Corporate
Finance, 2004). Of course Acme does not wish to reduce assets; indeed the result of its greenfield expansion will be to increase assets. Thus it has one broad
choice available to it, that of increasing liabilities. Within this choice lie many others, all of which have the ability to directly affect the value of the firm and
its ability to operate with sufficient cash flow. One choice available to Acme is to sell corporate bonds. These are viewed as
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