Julian Eastheimer
As a finance student, you should be able to help Bentley by telling him which companies in Section B should use the financing methods listed in Section A.
Section A Leasing arrangements Long-term bonds Debt with warrants Friends or relatives Common stock: non-rights Preferred stock (nonconvertible) Common stock: rights offering Convertible debentures Factoring
Section B
Boudoir’s Inc. Timberland Power & Light Ripe and Fresh Canning Company Piper Pickle Company Copper Mountain Mining Company Bull Gator Saloon and Dance Hall Golden Gate Aircraft Corporation Schooner Yachts Teller Pen Corporation
Financing Method Company Reasoning
1. Leasing arrangements Boudoir’s Inc. The company can negotiate for a lease to own arrangement for the new building with a builder or contractor. 2. Long term bonds Timberland Power & Light Reasonable norm for long-term debt will still be in range (45-65%) when adding the additional $37M in long-term bonds. $937M/$$1.5B assets=62.5% 3. Debt with warrants Copper Mountain Mining Company Because the company’s debt ratio is below the industry avg., it can offer additional debt mediums. Their stock ($11) is selling within the avg. range but below the upper bound of $13 (EPS of $1 x 13). A warrants or a right to purchase the company’s stock at the current market price of $11 in the future is inviting. 4. Friends or relatives Bull Gator Saloon and Dance Hall Borrowing from friends or relatives is easier for this type of proposed small business considering the owner is not an established businessman. Common stock: non-rights Schooner Yachts Raising capital from existing stockholder’s may be difficult considering the additional capital requirements is almost 50% of the company’s total existing assets. Issuing common stock to the public through a non-rights issuance is a good option. Preferred stock (nonconvertible) Piper Pickle Company Issuing
Section A Leasing arrangements Long-term bonds Debt with warrants Friends or relatives Common stock: non-rights Preferred stock (nonconvertible) Common stock: rights offering Convertible debentures Factoring
Section B
Boudoir’s Inc. Timberland Power & Light Ripe and Fresh Canning Company Piper Pickle Company Copper Mountain Mining Company Bull Gator Saloon and Dance Hall Golden Gate Aircraft Corporation Schooner Yachts Teller Pen Corporation
Financing Method Company Reasoning
1. Leasing arrangements Boudoir’s Inc. The company can negotiate for a lease to own arrangement for the new building with a builder or contractor. 2. Long term bonds Timberland Power & Light Reasonable norm for long-term debt will still be in range (45-65%) when adding the additional $37M in long-term bonds. $937M/$$1.5B assets=62.5% 3. Debt with warrants Copper Mountain Mining Company Because the company’s debt ratio is below the industry avg., it can offer additional debt mediums. Their stock ($11) is selling within the avg. range but below the upper bound of $13 (EPS of $1 x 13). A warrants or a right to purchase the company’s stock at the current market price of $11 in the future is inviting. 4. Friends or relatives Bull Gator Saloon and Dance Hall Borrowing from friends or relatives is easier for this type of proposed small business considering the owner is not an established businessman. Common stock: non-rights Schooner Yachts Raising capital from existing stockholder’s may be difficult considering the additional capital requirements is almost 50% of the company’s total existing assets. Issuing common stock to the public through a non-rights issuance is a good option. Preferred stock (nonconvertible) Piper Pickle Company Issuing