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Required: Karolina has approached your financial consultancy business for guidance. You will need to write a report addressed to Karolina outlining the pros and cons of all three sources of finance options as listed below. You are not required to give any recommendations. Karolina is a profitable sole proprietor retail shop operating on the High Street of Didcot, Oxfordshire. The owner, Karolina Da Silva, has the opportunity of opening a second store in the nearby town of Harwell, Oxfordshire. She will need a total of 100,000 to establish the new store. Karolina's Didcot store extract of the latest Statement of Financial Position is below: If the new store in Harwell is opened, Karolina is expecting that she will need to spend the following: \begin{tabular}{l|l} A. Acquisition of Non-Current Assets & 56,000 \end{tabular} Her projections show that the store is likely to make annual profits of 10,000 in the first year with this figure likely to grow exponentially by 25% annually. This figure has not taken into account any interest on loan or dividends on shares to be paid during the year. Karolina has the following options opened to her in terms of raising the capital needed to open the store. Below, each option is outlined: 1. Seek a Non-Current 10 -year loan of 100,000 at 8.9% interest from a financial Institution. HSBC has agreed in principle to lend her the money 2. Convert the business to a limited company by offering 100,000 ordinary shares at 0.50 each in addition to 50,0005% preference shares at 1 each to family and friends. Karolina will retain 60,000 ordinary shares for herself in order to maintain a controlling interest in the new company. She will need to use her personal savings as additional investment in the business. 3. Karolina has approached a 'business angel' who is willing to put up 60,000 for a 45% stake in the business. As part of the deal, the 'business angel' will provide a technical management team that will assist with establishing and maintaining a website along with establishing a 2-year marketing campaign for both stores. The annual additional costs are budgeted at 3,600 and is expected to generate an additional 12,000 in profit across both stores. These figures were not accounted for in Karolina's original profit progression. She will need to use her personal savings as additional investment in the business

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