Financing Options
You’ve owned a tool and die company for the last five years. Even during the recession, you have been earning a net profit of 30% on your investment and have been able to pay yourself a reasonable salary. You are feeling so confident that you are considering expanding. You believe that your profit potential can improve greatly if you could expand your product line with newer high-tech equipment. You estimate that you will need $1 million for the expansion.
1.What are your financing alternatives?
2.Would you consider selling bonds if you had to pay 12% interest? Why or why not?
3.What are the major advantages of issuing bonds?
4.A venture capital firm has agreed to invest the money you need. In return, the firm will own 75% of the business. You will be replaced as board chair and CEO, though you’ll retain the title of company founder and president. The VC firm will hire a new CEO. Would you be willing to take the money but lose control of your business? Why or why not?
Here is a example of how long should the answer be:
