Question

The Government of Ghana in an attempt to stimulate the Ghanaian economy after the COVID 19 pandemic has set aside GH¢600 million as a stimulus package for businesses. These stimulus packages are to be in the form of soft loans for businesses. However, some believe that these loans must be extended to firms in industries that are worst hit by the pandemic. As the Finance Director of your company, you have been tasked to present a proposal to the Board of Directors of your company for consideration. Your proposal must address the following;

1. The negative impact of the COVID 19 pandemic on the operations of your firm, justifying why your firm needs such a stimulus package? Your arguments should be situated within the industry within which you operate.
2. With your understanding of lessons on capital structure, which other four (4) factors should your firm consider before choosing this source of debt finance?
3. Discuss four (4) risks that your company is likely to be exposed to if it goes ahead with this source of debt finance.
4. Explain how this decision will affect the return to the equity holders or shareholders of your company following the arguments of M&M proposition 2.

Answer 1