Question

Mvela Ltd has 100,000 shares in issue. The shares are currently trading at R100 per share. Mvela needs a new factory. The factory is,

Options:
a) Funded by issuing more shares.
b) Financed through a bank loan.
c) Funded by selling existing assets.
d) Financed through dividends.

Answer 1

The best option for Mvela Ltd to fund the new factory would be to finance it through a bank loan.

Step-by-step explanation:

The best option for Mvela Ltd to fund the new factory would be to finance it through a bank loan. By borrowing from a bank, Mvela Ltd can secure the needed capital without diluting its ownership or control and without committing to scheduled interest payments. Issuing more shares would dilute the ownership and control of the company, selling existing assets might not provide sufficient funds, and financing through dividends would involve distributing profits to shareholders rather than investing in the factory.