CLG operates six airports in country L. The directors plan to enlarge its main airport by adding another runway for aircraft to land on and take off from. That will cost $300m. Selecting an appropriate finance source will matter. The Managing Director said: ‘CLG may be able to provide 50 extra flights each day. There are environmental pressures, including the loss of green spaces and additional pollution. There will also be external benefits. I hope the Government approves the building of the new runway.’ Interest rates rose in 2017.
(a)[2]
What does the term ‘shareholder’ mean?
(b)[2]
Identify two reasons a business could need short-term finance.
(c)[4]
Identify and explain two ways increased interest rates might affect CLG.
(d)[6]
Identify and explain two factors, other than interest rates, that CLG ought to consider when choosing a finance source to pay for the expansion.
(e)[6]
Taking the external costs and external benefits into account, do you think the Government should let CLG build the new runway? Justify your answer.