Option 1: Merit could approach JPMorgan Chas, a bank that had served Merit well for many years with seasonal credit lines as well as medium-te loans. Lehn believed that JPMorgan was unlikely to make a $4 billion loan to Merit on its own, but it could probably gather a group of banks together to make a loan of this magnitude. However, the banks would undoubtedly demand that Merit limit further borrowing and provide JPMorgan with periodic financial disclosures so that they could monitor Merit's financial condition as it expanded its operations. Option 2: Merit could convert to pubic ownership, issuin stock to the public in the primary market. With Merit's excellent financial performance in recent years, Sara thought that its stock could command a high price in the market and that many investors would want to participate in any stock offering that Merit conducted. Required: •Pros and cons of option 1 and 2 •Which option do you think Sara should recommend to the board and why?
Option 1: Merit could approach JPMorgan Chas, a bank that had served Merit well for many years with seasonal credit lines as well as medium-te loans. Lehn believed that JPMorgan was unlikely to make a $4 billion loan to Merit on its own, but it could probably gather a group of banks together to make a loan of this magnitude. However, the banks would undoubtedly demand that Merit limit further borrowing and provide JPMorgan with periodic financial disclosures so that they could monitor Merit's financial condition as it expanded its operations.
Option 2: Merit could convert to pubic ownership, issuin stock to the public in the primary market. With Merit's excellent financial performance in recent years, Sara thought that its stock could command a high price in the market and that many investors would want to participate in any stock offering that Merit conducted.
Required:
•Pros and cons of option 1 and 2
•Which option do you think Sara should recommend to the board and why?
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