Tui Fin 301 Mod 5 Case

In 2003, Ameri give notice Superconductor Corporation (AMSC) decided to forgo a $50 million debt pay plan and instead went with allegiance financing. In this paper I will treat whatever of the returns and disadvantages with such a plan, and my opinion of their decision. First, I will argue advantages to AMSCs plan of opting for virtue financing First and foremost, by non electing to film financing in that location is no commitment to bring about placed payments in the future. Their choice to finance through righteousness eliminated the debt incurred by the current plan. A side benefit to that is there is no loan payment to budget for. A secondment advantage to uprightness financing is the comp all does non flummox to passing up collateral as they would have in the original plan to finance the $50 million. Therefore, the company is not at risk of losing collateral, or possibly the entire transmission line to the financier. Additionally, any poss ible losses incurred will be partingd with the comeliness holders. The final advantage enjoyed by AMSC is that they can keep the fiscal tractableness described in Aswath Damodarans presentation: The Debt-Equity walk out Off: The Capital Structure Decision. According to the presentation, when a sozzled borrows up to its capacity, it loses the flexibleness of financing future projects with debt.

AMSC retained that flexibility by opting for equity financing. With those advantages also come various disadvantages. First, payments on debt interest are tax deductible but payments on equity are not. Second , equity allows parcel of landholders to sh! are the company profits. With that, equity holders now also hold stake in AMSC and share control. Comparatively, debt financiers have little or no impact on control of the company; assuming payments are being made. prize are also used to pay the debt, however, so how this weighs note up as a disadvantage would clearly depends on how swell or not the business is doing. At to the lowest degree with debt financing you have a fixed expense that can be accounted...If you want to get a full essay, order of battle it on our website: BestEssayCheap.com

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