Julian Eastheimer

Topics: Finance, Debt, Stock Pages: 4 (960 words) Published: April 13, 2011
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

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 MethodCompanyReasoning
1. Leasing arrangementsBoudoir’s Inc.The company can negotiate for a lease to own arrangement for the new building with a builder or contractor.

2. Long term bondsTimberland Power & LightReasonable 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 warrantsCopper Mountain Mining CompanyBecause 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 relativesBull Gator Saloon and Dance HallBorrowing from friends or relatives is easier for this type of proposed small business considering the owner is not an established businessman.

Common stock:
non-rightsSchooner YachtsRaising 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 CompanyIssuing...
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