A number of alternatives are available to a company which requires a capital infusion of $200,000. It is currently a closely held corporation with less than 50 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. It can: Obtain private debt financing
• Seek out a private investor(s) who would be willing to share ownership
• Seek out offers for a private buy-out
• Issue public debt (corporate bonds)
• Issue public common stock
From the cost of capital point of view, what’s the impact and implications of each alternative? Considering the size of the investment ($200,000) how does this impact of this infusion of capital on the financial statements?