So, ill throw my 2c in here...
As a company, you can either issue share capital to investors, where the cost of equity will be, the expectation on ROI.
Ill use 15% for this example, and this is post tax
OR
You can take on debt.
If you look at interest on a loan you'd be looking at 6-8% - note that interest paid on a business loan is tax deductible too.
So, as you can see, debt is cheaper than equity.
As a producer with serviceable cash flows debt is in fact your friend - provided repayments can be managed.
Earnings per share are retained due to no dilution, so this not only has a lower cost, but drives future value for shareholders.
Great decision by management also, as there would have been the alternative to park Flames well until we raised the funds in cash from earnings from Rangers.
This decision expedites Flames well, and it the best option to deliver value to shareholders.
My Opinion Only
DYOR & MYOD.
NFA etc etc
Happy trading
- Leezy
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So, ill throw my 2c in here...As a company, you can either issue...
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