18.

1 Organizational form: List some common forms of business organization, and

discuss how access to capital differs across these forms of organization.
The forms of the organizations analyzed are: Unipersonal Society, Association
(General Society and Limited Partnership), Corporation (S-Corporation and C-
Corporation) and Limited Liability Company (LLP) and Company (LLC).
Sole proprietorships use as a form of capital contribution of the holder and the debt
or lease financing.
While partnerships can appeal to all partners to obtain additional capital and
corporations can sell shares to third parties. Limited partners and LLC are less
limited than corporations in general because they may increase the money of
limited partners or partners, since the external investors in LLCs are called that
they are not directly involved in running the business. C-corporations may have an
unlimited number of shareholders

18.3 Organizational form: Explain how financial liabilities differ among different
forms of business organization.

With sole proprietors and general partners, there is the possibility that personal
assets can be taken to satisfy claims on the businesses. In contrast, the liabilities
of investors in LLPs, LLCs, and corporations are generally limited to the money
that they have invested in the business.

18.5 Cash requirements: You believe you have a great business idea and want to
start your own company. However, you do not have enough savings to finance it.
Where can you get the additional funds you need?

Equity capital can originate from friends and family, venture capitalists, or other
potential investors you know about. Debt capital can be obtained from bank loans,
cash advances on credit cards, or personal loans or from other individual investors
or other businesses.
18.7 Replacement cost: What is there placement cost of a business?

The cost of replacing a company is defined as the cost of replacing the assets of
the company in the current situation
18.9 Non-operating assets: Why is excess cash a non-operating asset (NOA)?
Why does it make sense to add the value of excess cash to the value of the
discounted cash flows when we use the WACC (FCFF) or FCFE approach to value
a business?

Excess cash is an asset that is considered to be non-operating because it can be

distributed to shareholders without affecting the operations of the company and,
therefore, the value of the expected free cash flows of the company. The excess
cash value is added again because it represents value above what is expected to
produce the company's operating assets.

18.11 Public versus private company valuation: You are considering investing in a
private company that is owned by a friend of yours. You have read through the
companys financial statements and believe that they are reliable. Multiples of
similar publicly traded companies in the same industry suggest that the value of a
share of stock in your friends company is $12. Should you be willing to pay $12
per share?

The answer might be no. Private stocks are relatively illiquid and the value will be
discounted due to the scarcity of liquidity in the market.

BIBLIOGRAPHY

Parrino, R., Kidwell, D. S., & Bates, T. (2011). Fundamentals of corporate finance.
John Wiley & Sons.