Analysis of the Case Study “Merit Enterprise Corp”
Analysis of the Case Study “Merit Enterprise Corp”
Abstract
In my analysis I will discuss the two different options for Merit Enterprise Corp. Should the chief financial officer (CFO) recommend Merit to get the $4 billion from a loan through JPMorgan and keep the business private or should Merit go public and issue stock in the primary market. I will go through the Pro and Cons for both options and explain which why CFO should recommend to the board to go with option 2.
Analysis of the Case Study “Merit Enterprise Corp”
The Chief Financial Officer of Merit Enterprise Corp has two options that she can recommend to the board. Lets take a look at option 1. Pros: We already know that JPMorgan Chase bank has served Merit for many years. The $4 billion loan can come quickly from JPMorgan Chase by gathering a group of banks together. As an investment bank it can help Merit raise capital, and engage in trading and market making activities. Because of their good relationship with the bank merit can negotiate to obtain a low interest rate. The business will stay private.
The cons: JPMorgan has served with Merit for many years with seasonal credit lines as well as a medium-term loan. Depending on how business goes they may need a long-term loan. Since the loans will come from different banks if the business does not produce enough cash flow there may be a chance for bankruptcy. JPMorgan will have the upper hand in their finances by demanding periodic financial disclosures to monitor Merit’s financial conditions while their operation is increasing. The bank may lay down certain restrictions that can affect future financing. Since $4 billion is a large loan the bank may require collateral. If the business doesn’t do so well they may use that to control assets and sell it for profit to make up for what they owe. Lastly failure to pay back the loan can result in a lawsuit, which can be the worst possible outcome. (Pros and Cons of Borrowing Money
Abstract
In my analysis I will discuss the two different options for Merit Enterprise Corp. Should the chief financial officer (CFO) recommend Merit to get the $4 billion from a loan through JPMorgan and keep the business private or should Merit go public and issue stock in the primary market. I will go through the Pro and Cons for both options and explain which why CFO should recommend to the board to go with option 2.
Analysis of the Case Study “Merit Enterprise Corp”
The Chief Financial Officer of Merit Enterprise Corp has two options that she can recommend to the board. Lets take a look at option 1. Pros: We already know that JPMorgan Chase bank has served Merit for many years. The $4 billion loan can come quickly from JPMorgan Chase by gathering a group of banks together. As an investment bank it can help Merit raise capital, and engage in trading and market making activities. Because of their good relationship with the bank merit can negotiate to obtain a low interest rate. The business will stay private.
The cons: JPMorgan has served with Merit for many years with seasonal credit lines as well as a medium-term loan. Depending on how business goes they may need a long-term loan. Since the loans will come from different banks if the business does not produce enough cash flow there may be a chance for bankruptcy. JPMorgan will have the upper hand in their finances by demanding periodic financial disclosures to monitor Merit’s financial conditions while their operation is increasing. The bank may lay down certain restrictions that can affect future financing. Since $4 billion is a large loan the bank may require collateral. If the business doesn’t do so well they may use that to control assets and sell it for profit to make up for what they owe. Lastly failure to pay back the loan can result in a lawsuit, which can be the worst possible outcome. (Pros and Cons of Borrowing Money