Funding for Covid 19
You are the chief financial officer of ACME Labs, a privately held biotechnology company that needs to raise $3 million to fund the development of a new drug that could potentially cure COVID9. Obviously time is of the essence. Unfortunately, your board of directors consists of considerable skeptics who are less than eager to spend the money on such an endeavor. Your mission is to provide financing options for consideration and hopefully make the Research and Development funding attainable by providing valuable information. Prepare a report that discusses
The types of long-term financing available to the firm
Their pros and cons
The key factors to consider in choosing a financing strategy. *Please be sure to properly cite your sources as needed, and include them at the end of your work.
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Funding for Covid-19 Report
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Funding for Covid-19 Report
In order to make the research and development funding attainable, long-term financing can be increasingly valuable for the privately held biotechnology company. Long-term financing entails using debt and equity financing. Equity is categorized common and preferred shares. More preferably, the long-term financing strategy recommended for the private company is by issuing shares. Common share depicts a fractional stake for the privately held company. A common stock buyer would provide coffers to the company in exchange for voting rights or control within the enterprise. The downside of common stock is that ACME Labs
would only receive the money from the initial stock sale rather than from subsequent transactions when an individual sell shares to another individual. With equity financing, the company would have an instant cash inflow that needs no payments in the future. The disadvantage is that the company’s equity-holders are significant shareholders and are empowered to poll on management issues and the firm’s future (Atrill, 2020). Common stock normally trades on securities exchanges.
The preferred stock incorporates equity and debt since it regularly pays a fixed dividend, prioritizes shareholders, and trades like shares. Using preferred stock as a financing strategy implies that the payments will be predictable and written off the tax statement. Nevertheless, preferred stock is less prevalent amongst stockholders than equity because it has a lower rate of return than stock (Atrill, 2020). It is also less popular compared to bonds since bonds characteristically have a more significant coupon rate.
Debt (bond) financing entails fixed-income security that earns intermittent interest but does not relinquish form ownership rights. In this case, ACME Labs would issue debt to persons with diffe...