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Finance Questions On Capital Raising Term Paper

For example, many of the large investment banks may choose to deal only with large deals will have minimum transaction sizes. Therefore, the first consideration may be the suitability of the bank given the size of the organization. There may also need to be consideration of the degree of attention and expertise that the investment banker direct with the company, even if the minimum is met, large organizations with a large number of clients may have a higher level of expertise that can be directed, but they may also be more focused on large clients. This can only be assessed by talking to the relevant investment bank. Prior to taking on any investment bank it will be necessary to allow the investment banker to make a pitch. Ross details of the organization's financial position may be given prior to this pitch, but an investment banker should be willing to sign a confidentiality agreement before receiving sensitive financial data, including projections for future performance.

Investment bankers will charge fees for their services, therefore the organization also need to decide the way in which they would like the fees to be structured when choosing investment banker. For example, a fixed set rate fee for services, or a lower fee supplemented by a performance-based fee, the greater the level of performance the higher the fees. The first provides for a degree of security uncertainty, whereas the second may result in higher fees if the investment banker is successful, but may also provide motivations for continued efforts.

It may also be argued that the relationship between feminine investment banker will also have a number of subjective aspects, and while many of the decisions may be made based on logical reasoning, such as what it is the investment bankers can do, fit between the company and investment bankers knowledge and experience, and fees, there may also need to be some consideration regarding the personal relationship which...

corporate bonds reflects the degree of security that is associated with the bonds, which is perceived as lowering the risk (Friedman, 1982). Corporate bonds are a form of loan, and while there is some risk; if the company folds there is a risk that the bonds will not be repaid; bondholders rank below other forms of creditors who have physical security within the organization. There are also risks that some companies may default on their bonds, and will not pay interest be able to repay them. However, as bondholders are higher in the level of priorities compared to stockholders, the level of risk associated with holding a corporate bond is usually deemed to be less than the equivalent stock in the same organization. This means that in terms of the risk premium, and the amount required tends to be less for a bond compared to the expected return on an equivalent equity investment (Friedman, 1982).
Equity investments are more risky than bonds, if a company folds, stockholders will be the last in the line of creditors, and as companies usually followed when they cannot pay all their creditors, stockholders will usually receive nothing on a company failure. This means that the risk premium is likely to be higher, and therefore although the risk is higher, the potential return is also higher.

References

Friedman, Benjamin M, (1982), The Changing Roles of Debt and Equity in Financing U.S. Capital Formation, University of Chicago Press

Miller, M. H, (1988), The Modigliani -- Miller Propositions after Thirty Years, Journal of Economic Perspectives 2(4), 99 -- 120.

Turo, J, (2013, October 2), How to Choose The Right Investment Banker to Sell Your Business, Entrepreneur, accessed 27th April 2014 at http://www.entrepreneur.com/article/228671

Sources used in this document:
References

Friedman, Benjamin M, (1982), The Changing Roles of Debt and Equity in Financing U.S. Capital Formation, University of Chicago Press

Miller, M. H, (1988), The Modigliani -- Miller Propositions after Thirty Years, Journal of Economic Perspectives 2(4), 99 -- 120.

Turo, J, (2013, October 2), How to Choose The Right Investment Banker to Sell Your Business, Entrepreneur, accessed 27th April 2014 at http://www.entrepreneur.com/article/228671
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