Corporate Finance: Expansion Plc case - Essay Example

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This project highlights the various sources of long term finance which can be used by the Expansion Plc to raise the required funds which is needed to finance the property, plant, equipments, current assets and other assets which are needed for its new operating division. …
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Corporate Finance: Expansion Plc case
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Download file to see previous pages Apart from choosing the right source of finance one of the major issue regarding financial is the decision regarding the capital structure. The issues related to the gearing of capital structure have also been discussed in detail in order to find out the right balance of various sources of finance for Expansion Plc. The market efficiency has also been discussed in this paper. Evaluation of different sources of long term capital Expansion Plc which is a listed in London Stock Exchange has planned to open an operating division for manufacturing a brand new product. The company has some internal funds but has planned to raise the required additional fund from other sources. Various types of sources are available in the market which can be used for raising the additional funds but every type of long term financing may not be useful for every company as different type of source have different type of cost of capital, different risk profile and different benefits and limitation. Therefore every aspect of long term source of finance have been analysed in detail. Sources Equity: This is a one of the common source of long term finance which is used by almost every company. The capital raised by equity financing is also known as common stock or shareholders’ stock and it is a part of the owners’ fund. Through equity financing the long term capital is raised by issuing equity shares in the primary market. The equity share holders who provide the funds to the company by purchasing the equity share are the owners of the company. They have the right to attend the annual general meeting and participate in the crucial managerial...
This paper focuses upon Expansion Plc which is a listed in London Stock Exchange has planned to open an operating division for manufacturing a brand new product. The company has some internal funds but has planned to raise the required additional fund from other sources. Various types of sources are available in the market which can be used for raising the additional funds but every type of long term financing may not be useful for every company as different type of source have different type of cost of capital, different risk profile and different benefits and limitation. Therefore every aspect of long term source of finance have been analysed in detail. Expansion Plc can raise its funds from any of the long term financing source discussed above like equity financing, long term debt etc but raising capital from any of these source the company will incur some costs. If Expansion Plc raises its funds through issuing equity shares or preference shares then the company would have to incur the costs associated with the public offer like the underwriter’s commission, payments to be made to the distributers, advertising costs, fees of merchant bankers etc. In case of long term debt if the company raises the funds by issuing bonds or debenture then also the company has to provide the fees to the underwriters, commissions to the brokers, stationary costs etc. Each source of financing will have different cost of capital that is the minimum required rate of return that the company will have to earn in order to satisfy the fund providers. ...Download file to see next pagesRead More
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