Corporate Finance: The Core (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
Corporate Finance: The Core (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
4th Edition
ISBN: 9780134202648
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 23, Problem 1P
Summary Introduction

To determine: The alternative sources from which private companies can raise equity capital.

Introduction:

Equity capital is the portion of the firm capital; these capital funds are paid into a business firm by an investor in exchange for shares of ownership in the company.

Expert Solution & Answer
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Explanation of Solution

The alternative sources from which private companies can raise equity capital are as follows:

  • Venture capitalist: An investor who provides capital to a start-up business firm or gives their support to small companies to expand their business is a venture capitalist.
  • Institutional investor: Institution investors are those organizations which invest on the behalf of the investor. These institutions are investment banks, money managers, hedge-fund investors, commercial trusts, and various others.
  • Angel investor: An investor who provides the capital for a start-up business firm, usually in exchange for convertible debt or ownership equity is an angel investor.
  • Corporate investors: A company that invests in other companies to control the business and increase their profit is a corporate investor.

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