FINANCIAL MANAGEMENT: THEORY AND PRACT
FINANCIAL MANAGEMENT: THEORY AND PRACT
15th Edition
ISBN: 9781305632455
Author: BRIGHAM E. F.
Publisher: CENGAGE L
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Chapter 18, Problem 15MC
Summary Introduction

Case summary: Person R wants to expand its business by raising $18.3 million through sell of common stock. The business has 50% of debt ratio and family of Person R invested personal wealth into the business. The family wants to retain controlling right.

To describe: The investment banking activities and effect on increase of investment bank’s risk.

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Randy’s, a family-owned restaurant chain operating in Alabama, has grown to the point that expansion throughout the entire Southeast is feasible. The proposed expansion would require the firm to raise about $18.3 million in new capital. Because Randy’s currently has a debt ratio of 50% and because family members already have all their personal wealth invested in the company, the family would like to sell common stock to the public to raise the $18.3 million. However, the family wants to retain voting control. You have been asked to brief family members on the issues involved by answering the following questions.   Why would a company consider going public? What are some advantages and disadvantages?
Randy’s, a family-owned restaurant chain operating in Alabama, has grown to the point that expansion throughout the entire Southeast is feasible. The proposed expansion would require the firm to raise about $18.3 million in new capital. Because Randy’s currently has a debt ratio of 50% and because family members already have all their personal wealth invested in the company, the family would like to sell common stock to the public to raise the $18.3 million. However, the family wants to retain voting control. You have been asked to brief family members on the issues involved by answering the following questions. What agencies regulate securities markets? How are start-up firms usually financed? Differentiate between a private placement and a public offering.
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