After another year, Biwei’s business is in rapid expansion. He wants to raise $1M new capital. He can finance by taking a loan or issuing stock shares. The market interest rate for a loan is 5%. For an angel investor, injecting $1M into Biwei’s business will dilute 50% of Biwei’s ownership. What is the capital cost of Biwei’s business expansion?
Explanation: This is one time expenses on production if goods and services , purchase of land and construction. It is the total cost required to bring a business to a commercially operable status.
