Merit Enterprise Corporation

Merit Enterprise Corporation

Introduction

This paper analyzes the case of Merit Enterprises Corporation. The major focus of this assignment is to answer the given questions in the case on the basis of financial concepts and terminologies. However, overall it discusses the main issues in the cases and analyzes the key factors given therein. Further, it proposes a tentative solution for the highlighted issues in the cases.

Discussion

Pros and cons of option 1, and prioritize your thoughts. What are the most positive aspects of this option, and what are the biggest drawbacks?

As stated in the case that Merit Enterprise needs to raise additional 4billion dollars in order to expand its operations. Sara Lehn proposed that there are two options that Company can go for in order to raise the required amount of funds. The first option that she mentioned was to opt for long term loans from the bank. However, since the amount required for the expansion is too large, there is a chance that whole lot may not be financed by one bank. A bunch of banks may be asked for the borrowed funds.

Pros

There are pros and cons for every option, so here we shall analyze the pros for this method of raising finance. The first benefit is that it is the fastest way to acquire the needed cash in comparison to floating shares and taking company to public. Further, there are very simple procedures that need to be followed to get the long term loan. 4 billion dollars is a huge amount, a company needs to be financially sound and maintain a good relation with the bank to get approval of this amount of loan. It was mentioned in the case that Merit enterprises have been taking short and medium term loans with the JPMorgan and have had ...