Question

Because of the declining demand for your ethanol product and difficulties in purchasing corn from U.S. farmers at a reasonable price you are considering moving your production facility to a foreign location. In the evaluation of this possibility you want to address two initial concerns. First, should foreign capital be used to meet the cost of relocating your facility? Second, what is the best way to finance this new project if foreign capital is used?

Answer 1

Solution

Yes,Foreign capital can be used to meet the cost of relocating the facility.For example,(say) the company is planning to relocate to India,then it can make use of the capital from there to fund it's relocation.

There are multiple ways to finance this new project if at all foreign capital is used.

1.The company can go public and list itself in the Indian Stock market. In this manner it can gather the capital from the Indian Public and in exchange give them stake in the Indian company.

This strategy of gathering the foreign capital ONLY BECOMES successful when there is some brand value already existing for the company and also it had shown good performance in the past and other factors like complying with the Indian laws,good reputation of the management staff etc.,

2.As an alternative ,the company can do road shows in different countries to attract the investors,fund houses,pension funds institutional investors etc., to invest in their company in the foreign location by describing them the benefits of investing in that venture.

The company can give importance to this strategy if the company is not very well known in the foreign land i.e., In India but it is a noted name in other countries and also with the investors who are keen to invest in that particular foreign country i.e., India etc.,

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