The pros of this option are 1) The well established relationship between J.P.

Morgan and Merit will facilitate ease of transactions and negotiations for the 4 billion loan. 2) Since the consortium of lending bankers will consist of J.P.Morgan , it could better explain the creditworthiness and credibility of Merit to the other bankers and facilitate in obtaining such a large amount of loan. * With additional funding of 4 billion being met by debt alone the ownership pattern and voting rights will remain impact. * Debt carries lower cost compared to equity. * The tax advantage of debt can be utilized by the company to improve earnings. The higher financial leverage can give the company higher profits if return form invested 4bn gives higher returns than the cost of debt. The drawbacks of option 1 are: * With increased reliance on debt the financial risk increases and the debt servicing burden of Merit will increase. * With increase in Debt/equity ratio cost of the loan will increase as now Merit has higher financial leverage. * This could result in chances of bankruptcy in periods of uncertainty or slowdown. * The consortium of bankers will lay down restrictive covenants which will impose restrictions on further form of funding. * There will be a lot of interference from the bankers in the form of periodic assessments and financial disclosures such as periodic cash flows and financial statements.

* This could create agency problems as there will be conflict of interest between the stakeholders, management and the lenders.... The Pros and Cons of option 2

1.

Broader access to raising capital leading to increased financial stability. By going public,

you tap into the single biggest source of capital in the United States. And one third of all companies that go public do a secondary offering within the first five years of going public; so for growing companies, this is a critical source of capital. 2. Establishes a market price for the company. This can be important for marketing the

company. Owners often try to market the company as a way of generating a return for those (owners, venture capitalist, etc.) who initially funded the company. Becoming liquid is a big reason for going public investors need to get paid back. 3. Securing long-term customer relationships. Customers want to do business with a company

that will be around for the long-haul. Public companies are viewed as long-term providers of services and products. Disadvantages to Going Public:

1.

Intense scrutiny from shareholders and the investment community. Management will be

under intense pressure to deliver growth and strong earnings.

2.

Much more disclosure than before. Disclosures include possible lawsuits, financial losses,

criminal actions, etc. 3. 4. Loss of control - Once pubic, the company could be a victim of a hostile takeover. Costs of Public Company Public companies have initial and recurring costs, such as

annual audit fees, increased payroll costs for financial personnel, public relations, director liability insurance, and other costs unique to a public company. 5. Restrictions on Stock Trading Stock sales are restricted under Rule 144. Insiders who

hold stock cannot sell the stock after the IPO. Underwriters will also impose certain lock-out provisions, restricting stock sales.