Question

Sherya Ltd. is a large credit-worthy company manufacturing automobiles for the Indian market .It now wants to cater to the other market and decided to invest in new machines. For this, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost the company decides to tap the money market.a) Name and discuss the money market instrument the company can use for the above purpose.b) What is the duration for which the company can get funds through this instrument?c) State any other purpose for which this instrument can be used.

Answer 1

To meet the floatation cost company can use commercial paper as a money market instrument.
its duration is 3 months to 12 months . it helps to cover flotation cost which is known as bridge financing .