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Integrative Case 1 - Merit Enterprise Corp.

Merit Enterprise Corp. is considering its options to raise a large amount of money. Option 1 is taking out a bank loan, which would provide debt financing with tax shield benefits but require annual interest and principal payments. Option 2 is going public and selling shares, which would raise more immediate cash but require increased disclosure, compliance with securities regulations, and changes to company culture and governance. The document does not make a recommendation between the two options.

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nelson
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34 views

Integrative Case 1 - Merit Enterprise Corp.

Merit Enterprise Corp. is considering its options to raise a large amount of money. Option 1 is taking out a bank loan, which would provide debt financing with tax shield benefits but require annual interest and principal payments. Option 2 is going public and selling shares, which would raise more immediate cash but require increased disclosure, compliance with securities regulations, and changes to company culture and governance. The document does not make a recommendation between the two options.

Uploaded by

nelson
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Integrative Case 1

-Merit Enterprise Corp.-

Statement of the
Problem:
Which option is better
between the the first and
the second options?

OPTIO
N1

CONS
1. This time the amount to be borrowed
is much bigger comparing to the
seasonal credit lines and medium term
loans made before.

CONS
2. Covenant that banks impose on
companies to which they lent money.

CONS
3. The company will have to pay interest
annually plus the repayment of the
principal.

PROS
1. Debts can often work as tax shields.

PROS
2. The company will not have to search
in many places to find investors.

OPTION 2

CONS
1.The need for added disclosure for investors.

CONS
2. The company must also meet other
rules and regulations that are monitored
by the Securities and Exchange
Commission (SEC).

CONS
3. The actions of the company's
management also become increasingly
scrutinized as investors constantly look
for rising profits.

CONS
4.Major changes in company's culture
&governance

CONS
5. Management &AIS often must be
upgraded

PROS
1.Shares have higher prices

PROS
2. Significant & immediate infusion of
cash

PROS
3. An increased in public awareness of
the company

PROS
4.May lead to an increase in market
share for the company

PROS
5. Obtain money that does not have to
be repaid

Conclusion

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