Final answer:
A loan from Umatilla Bank and Trust for Pharoah Company could serve different purposes such as expansion, technology investment, hiring, or debt repayment, depending on the company's financial strategy and the intended use of the funds.
Step-by-step explanation:
The main purpose of the loan from Umatilla Bank and Trust that Pharoah Company is considering would depend on the specific financial strategies and needs of Pharoah Company. When firms decide to raise financial capital, they have a few options, including borrowing through banks or bonds, reinvesting profits, soliciting early-stage investors, or issuing stock. Each method has its trade-offs in terms of cost, control, and financial flexibility.
If Pharoah Company is conducting a major expansion, it may require a significant amount of capital which can be obtained through a loan. Borrowing from a bank would mean Pharoah Company is obligated to pay back the loan with interest, whereas if they issued stock, they would be sharing ownership and profits with the shareholders.
Firms like Pharoah Company become borrowers when they believe the return on investment from the expansion, new technology acquisition, or hiring efforts will exceed the costs of the loan. Hence, the main purpose of Pharoah Company seeking a loan from Umatilla Bank and Trust could be to expand their operations, invest in new technology, hire additional staff, or pay off existing debts. The correct option would depend on the specific intent that Pharoah Company declares for seeking the loan.