Financing Corporate Expansion (Scenario)
Intensity Games is an MNE based in San Francisco that manufactures a popular line of video game consoles and accessories. Intensity owns manufacturing facilities in China and Russia, where the components of the game consoles are manufactured and assembled before being shipped around the world. Intensity also owns numerous subsidiaries that manufacture game cartridges for Intensity game platforms. Intensity managers have determined that the firm needs to expand its Chinese facility to accommodate the increasing demand. The firm needs to raise several million dollars to finance the expansion. The financial managers of Intensity are discussing the various financing options available to the firm.
Which of the following is most likely a disadvantage of Intensity raising funds through equity financing?
◦ Intensity management could lose a controlling interest in the firm.
◦ Intensity would not be able to repay shareholders at any time.
◦ Intensity management would end up in bankruptcy.
◦ Intensity could lose money from currency fluctuations in emerging markets.
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