Answer / alluri srikanth reddy

to raise capital it issue debentures and shares but if
interest is low, company should go for issuing debentures
because if it issue shares ownership dilutes it results
decrease in EPS

Answer / vibha goyal

if the rate of interst is less than tha company should
issue a debenture beacuse there is a low risk .but if
interst is to much high than company should issue share

Answer / priya sharma

To raise its Finance most of the companies need to issue
Debentures & Shares.

Answer / ashish shrivastava

To raise its Finance companies can issue Debentures &
Shares. But both of the option can depand on the current
and future market position because if the current interest
rate in financial market is low so company can issue the
debenture but if the eps of their share price is high so
company can issue thier share with high premium and
increase its market price of the share.

Answer / supriya

to raise capital company can issue debentures and
shares.for a new firm it is better to issue shares rather
than debentures because at initial stage the company may
not be able to pay interest.whereas for an existing company
it is better to issue debentures because they may be able
to repay amount for debenture holders and then they can
utilize profits and increase their shareholders wealth

Answer / ashutosh trivedi

when company needed money then it issues the debenture and
shares but this is depend upon the companies financial
position that it shoud issued the debenture or share.

Answer / suman sharma

The company raises capital/finance using 2 methods.

1)Internally.
2)Externally.

Internally the finance is raised by the issue of the
debentures that is raising the money on intrest from the
borrowers.

Externally the finance is raised by the issue of the
shares,preference shares and equity shares.

Answer / rakesh

While deciding between shares and debentures the following
pionts needs attention-
1) Whether a company wants to dilute the existing ownership
or to increase the dedt.
2) The earning capacity of the company.
3) The rate of interest on bonds and the expected divident
payout.
4) Tenure-Long term(shares) or short term(debentures)
5) Reputation of the company.
All the above are some key points. The decision is
usually based on multi-attributes.

Answer / vishal pandey

new firm it is better to issue shares rather
than debentures because at initial stage the company may
not be able to pay interest.whereas for an existing company
it is better to issue debentures because they may be able
to repay amount for debenture holders and then they can
utilize profits and increase their shareholders wealth.
through this process we can maintain companies EPS.

Answer / d pandu

company issue the shares and debentures to raise the funds
its needed to run the company

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Sean Alicandri, a sophisticated investor who is both willing and able to take risk, has just noticed that Mid- West Airlines has become the target of a hostile takeover. Prior to the announcement of the offer to purchase the stock for $72 a share, the stock had been selling for $59. Immediately after the offer, the offer the stock rose to $75, a premium over the offer price. Such premiums are often indicative that investors expect a higher price could occur if a bidding was erupts for the company or if management buyout of the firm. Of course, if neither of these scenarios occurs, the price of the stock could fall back to the $72 offer price. In addition, if the offer were to be withdrawn or defeated by management, the price of the stock could fall below the original stock price. Alicandri has no reason to anticipate that any of these possibilities will be the final outcome, but the realizes that the price of the stock will not remain at $75. If a bidding war erupts, the price could easily exceed$100. Conversely, if the takeover fails, he expects the price to decline below $55 a share, since he previously believed that the price of the stock was overvalued at $59. With such uncertainty, Alicandri does not want to own the stock but is intrigued with the possibility of earning a profit from a price movement that he is certain must occur. Currently there are several three months put and all options traded on the stock. Their strike and market prices are as follows: Strike Price Market Price of Call Market Price of Put $50 $26.00 $0.125 55 21.50 0.50 60 17.00 1.00 65 13.25 1.75 70 8.00 3.50 75 4.25 6.00 80 1.00 9.75 Alicandri decides the best strategy is to purchase both a put and a call option (to establish a straddle). Deciding on a strategy is one thing; determining the best way to execute it is quite another. For example, he could buy the options with the extreme strike price (i.e. the call at $80 and the put at $50). Or he could buy the options with the strike price closest to the original $72 offer price (i.e. buy the put and the call at $70). To help determine the potential profits and losses from various positions, Alicandri developed profit profiles at various stock prices by filling in the following chart for each position: Price of the stock Intrinsic Value of the Call Profit on the Call Intrinsic Value of the Put Profit on the Put Net Profit $50 55 60 65 70 75 80 85 To limit the number of calculations, he decided to make three comparisons: (1) the purchase of two inexpensive options-buy the call with the $80 strike price and the put with the $60 strike price, (2) the purchase of the options with the $70 strike price, and (3) the purchase of the options with the price closest to the original stock price (i.e., the options with the $60 strike price). Construct Alicandri’s profit profiles and answer the following questions. 1) Which strategy works best if a bidding war erupts? 2) Which strategy works best if the hostile takeover is defeated? 3) Which strategy works best if the original offer price becomes the final price? 4) Which of the three positions produces the worst result and under what condition does it occur? 5) If you were Alipcandri’s financial advisor, which strategy would you advise he establish? Or would you argue that he not speculate on this takeover?

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