Corporate Accounting: Capital Raising and Investment Analysis

This report, prepared for the Board of Directors, analyzes financial decisions regarding capital raising and investment opportunities for a recently quoted company. The report examines the current capital structure, considering both equity and debt financing options, and evaluates the cost efficiency of each method. It assesses the viability of a new investment project by analyzing cash flows and determining whether the project should be accepted. The analysis includes numerical examples and recommendations based on the financial consequences of different financing choices. The report concludes with recommendations on the most suitable capital-raising method and whether the proposed investment should be pursued, providing insights into corporate accounting tools for effective decision-making. The report suggests raising capital using only equity option and not adopting the production plan as the company will not be profitable.

CORPORATE ACCOUNTING

TABLE OF CONTENT
INTRODUCTION
MAIN BODY
CONCLUSION
REFERENCES

INTRODUCTION
Corporate accounting refers to the branch of accounting that deals with recording of accounting transaction
of the companies for the preparation of financial statements such as income statement, cash flow statement,
balance sheet, analysis and also for the interpretation of financial results of the companies.
Corporate accounting also helps the enterprise in ensuring a optimum capital structure analysing the cost of
every option. With use of corporate accounting managers also take various investments decisions about the
profitability of the proposed investments.
Present report in based over application of concepts and techniques of corporate accounting for deciding
the ways of raising capital that is optimum. It will also provide the company about the viability of
investments in new proposed products by measuring the cash flows that will be generated by the company.
This will enhance the understanding about the concepts of various accounting tools for effective decision
making. Concepts will be explained through the numerical examples in the report.

Financial Proposal
 Company is currently having a capital
structure of issued share capital
valued at 50c that equals to 75 million
and with the debt capital of 105
million.
 Company is having higher of the debt
capital in comparison with the equity
capital.
 Cost of equity of the unlevered firm is
12% and the cost of long term debt is
4%. Company is having optimum
capital structures as the market value
of shares is €1.25 each.

Recommendation
 Under the current capital structure company is having the cost of
capital of 11.63%.
 From the option of only debt or only equity it will be having the lowest
cost of capital under debt. Under the MM approach the cost of equity
will decrease in equity option. While in the debt option cost of equity
will rise to 16.30%.
 Though the option of debt appears to be more beneficial due to its
lower cost of capital. But at the same it will also be raising the required
rate of return over equity also.

Investment Proposal

CONCLUSION
 Under the financial plan it should raise capital using only Equity
option. As this is the most beneficial option with slight increase in its
overall cost.
 Under the investments plan it is identified that it should not adopt the
production plan. as company will not be profitable for the company.

REFERENCES
 Allen, A.M., Ramanna, K. and Roychowdhury, S., 2018. Auditor
lobbying on accounting standards. Journal of Law, Finance &
Accounting, Forthcoming.
 Zeff, S.A., 2018. An Introduction to Corporate Accounting Standards:
Detecting Paton's and Littleton's Influences. Accounting Historians
Journal, 45(1), pp.45-67.