Reference no: EM132591794

Case Study:

The Exceptional Service Grading Company requires a capital infusion of $500,000. It is currently a closely held corporation with less than 25 shareholders. Although the shareholders are not all related to each other, they all know each other, and they view the business as a family business.

Several alternatives are available to the company, consisting of the following:

1. Obtain private debt financing
2. Seek out a private investor(s) who would be willing to share ownership (private transfer of partial ownership)
3. Seek out offers for a private buy-out (private transfer of entire ownership)
4. Issue public debt (corporate bonds)
5. Issue public common stock (public equity offering)

Question 1: Briefly discuss each alternative and include implications to the company's capital structure and cost of capital, if any. Considering the size of the investment ($500,000 infusion), provide a conclusion on how it might impact the financial statement reviewed in Unit 1. No calculations are required.