Buoyant business conditions in Australia has prompted the board of PKR Small Goods Pty Ltd, a...

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Buoyant business conditions in Australia has prompted the boardof PKR Small Goods Pty Ltd, a third generation privately ownedfamily business to look at expanding their operations. The board,which is made up entirely of family members, is looking to doublethe size of the business over the coming five years and hasestimated that this will require an additional capital expenditure(CAPEX) of $225 million. There is considerable debate amongst boardmembers as to how this expansion should be funded - some of theideas that have been put forward include, raising equity by listingon the Australian Stock Exchange, issuing bonds, borrowing thefunds needed from the firm’s banks, utilising retained earnings, orsome combination of the preceding measures. In light of the debateamongst board member’s, they have sought your advice as a financespecialist and have requested that you write a report that:
Critically evaluates the perceived advantages anddisadvantages to the firm of each of the preceding forms offunding. (1000 words)

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4.0 Ratings (466 Votes)

The company may create required capital in combination of all the sources like issuing new shares use of retained earning loan from banks As the combination of different sources will help company to create an optimal capital structure See Answer

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