Case Study:

The Exceptional Service Grading Company requires a capital infusion of $$500,000.$ It is currently a closely held corporation with less than $25$ 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. The financial statements should be familiar to you because you performed a basic financial analysis of the company in Unit $1$ of this course.

Several alternatives are available to the company, consisting of the following:

Obtain private debt financing

Seek out a private investor$($s$)$ who would be willing to share ownership $($private transfer of partial ownership$)$

Seek out offers for a private buy$-$out $($private transfer of entire ownership$)$

Issue public debt $($corporate bonds$)$

Issue public common stock $($public equity offering$)$

Briefly discuss each alternative and include implications to the company$$s capital structure and cost of capital, if any. Considering the size of the investment $($$$500,000$ infusion$),$ provide a conclusion on how it might impact the financial statement reviewed in Unit $1.$ No calculations are required.