CanWest Corporation is a newly established IT company that focuses on high-end software development for the...

CanWest Corporation is a newly established IT company that focuses on high-end software development for the worldwide market. Assume that you were the CFO. Suggest the capital structure that can suit this corporation best. Discuss and explain.

ASAP

Solutions

Expert Solution

CanWest Corporation is a newly established company. Therefore, it will not be in a position to borrow money from banks/financial institutions as they provide loans on the basis of previous financial performance and credit rating of the company. In such a case, the company is left with the option of contribution from promoters/business owners or funding from venture capitalists. In other words, the company will have to rely on equity as a major source of financing its business operations. The other possible option would to borrow money from friends/relatives.

The amount of money that may be contributed by the promoters/business owners or obtained from friends/relatives may be limited. Therefore, the company will have to approach venture capitalists to obtain additional funds. While, this form of funding is not guaranteed, the company can raise substantial amount of money if its business plan/proposal is found to be attractive by the investors. However, these investors may demand a huge stake in the company's equity and participation in decision making. The CFO should consider the benefits and costs associated with this form of financing before taking a final decision.

In the current situation, it can be concluded that the company's capital structure will comprise equity. With the passage of time, the company may be able to include debt in its capital structure if it shows growth and profit potential.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Working Hours at Zumaju Corp. Zumaju Corp. is a newly established high-tech company, Currently it employs...

Working Hours at Zumaju Corp. Zumaju Corp. is a newly established high-tech company, Currently it employs 80 workers, most of whom are male, under 30 years of age and nearly having at least a bachelor's degree. Employees who come late to work are a constant problem. All kinds of excuses are offered, the most common being the heavy traffic in the area near the office which is located in the centre of the city. Sometimes, the staff say they are...

A manufacturing company wants to verify the output of their newly acquired MRP software by comparing...

A manufacturing company wants to verify the output of their newly acquired MRP software by comparing the computer output with their hand-calculated first ROP for each item in their BOM. They are examining output from their daily April 30 MRP. LT=lead time Qd=lot size discipline SS=safety stock GR=Gross Requirements SR=Scheduled Receipts PBS=Projected Stock Balance POR=Planned Order Release Master Production Schedule: Date, May 1 2 3 4 5 End-Item 15 10 18 4 9 . Inventory Records File: Item End-Item...

1. Jones Manufacturing is a newly established company that produces and sells components of electrical fixtures...

1. Jones Manufacturing is a newly established company that produces and sells components of electrical fixtures Currently, it has an opportunity to invest $1,000,000 in the equipment needed to produce plastic fixtures for kitchen use. If the company decides to sell kitchen fixtures, it has reason to believe that it can generate the following profit stream during a six-year life cycle for kitchen fixtures. End of Year Profit 1 $ 10,000 2 100,000 3 500,000 4 600,000 5 400,000 6...

PT Maha Gogo is a newly established company which main operation is to rent and sell...

PT Maha Gogo is a newly established company which main operation is to rent and sell vehicle. At January 1, 2019 PT Maha Gogo purchased 100 cars (@USD10,000) on accounts, in which half of them will be up for sale. During the year, PT Maha Gogo has sold 25 cars and made a 25% payment to the vendor for the purchase made at January 1, 2019. As an auditor in charge of year end audit December 31, 2019 of PT...

Standards for Nonmanufacturing Expenses CodeHead Software Inc. does software development. One important activity in software development...

Standards for Nonmanufacturing Expenses CodeHead Software Inc. does software development. One important activity in software development is writing software code. The manager of the WordPro Development Team determined that the average software programmer could write 25 lines of code in an hour. The plan for the first week in May called for 4,650 lines of code to be written on the WordPro product. The WordPro Team has five programmers. Each programmer is hired from an employment firm that requires temporary...

Your software development company wants to continue developing and enhancing a software application for internal use....

Your software development company wants to continue developing and enhancing a software application for internal use. For this week's assignment, the application is required to read from a file (data.txt) containing employee data. Your tasks include: Use the data file from Week One (data.txt) Implement LINQ functionalities to search, display, and modify employees' records Meet specifications by displaying on a Windows Form Application Program Input File: Using Visual Studio and C# programming concepts and using your Week one data.txt file...

DETAILS OF THE COMPANIES Getswift Ltd is an Australian newly listed company which provides a software...

DETAILS OF THE COMPANIES Getswift Ltd is an Australian newly listed company which provides a software distribution solution. This is the same company that was used in the Individual assignment. It is expected that students research this company beyond just the financial statements (especially for Part B) Pursuit Pty Ltd has been a target customer of GetSwfit’s for many years. It is a large distribution company which services supermarkets. The acquisition of Pursuit would allow GetSwift to increase its scale...

Question 4: Mr. Rashid is the owner of Rashid Furniture, SAOG, a newly established furniture company...

Question 4: Mr. Rashid is the owner of Rashid Furniture, SAOG, a newly established furniture company in Oman. He is personally designing his products. Mr. Rashid was previously the chief designer for Ikea Middle East. He has a marketing team that is responsible for marketing his product inside and outside Oman. His products are sofas cabinets, beds, and tables. a. Based on the case above, how would you price the unique design products? b. How would you distribute your products...

What is layered software development?

The Evergreen Chemical Corporation, established in 1990, has managed to earn a consistently high rate of...

The Evergreen Chemical Corporation, established in 1990, has managed to earn a consistently high rate of return on its investments. The secret of its success has been the strategic and timely development, manufacturing, and marketing of innovative chemical products that have been used in various industries. Currently, the management of the company is considering the manufacture of a thermosetting resin as packaging material for mobile devices. The Company's Research and Development Department has come up with two alternatives: an epoxy...

Subjects