Julian Eastheimer Financing Alternatives
FINANCING ALTERNATIVES Recommended methods of financing for each company are described in the following. ... Boudoir’s, Inc Company characteristics: - three shareholders- rapid growth- real estate under mortgage to an insurance company- inventory under blanket chattel mortgage- accounts receivable are all factored- total assets $7 million Capital requirements: $450,000 to finance a building and fixtures for a new outlet Financing alternative Preferred stock (nonconvertible); bank term loan Explanation - as the real estate as well as the inventory are under mortgage no further long-term debt is recommendable; the inventory is under mortgage to secure the bank credit line, therefore they might be able to obtain a bank term loan- if the three shareholders do not want to change the voting rights relations they might consider to issue preferred stock that is nonconvertible 2. Timberland Power & Light Company characteristics: - Holding; SEC approval required – automatic if company stays within conventional norms for the public utility industry = long-term debt of 45% - 65%, preferred stock of 0 to 15%, common equity 25%-45%- total assets $ 1,5 billion- $900 million debt- $75 million preferred stock- $ 525 million common equity Capital requirements: $37 million Financing alternative Regular common stock issue, convertible debentures Explanation Debt ratio = total debt / total assets = 60%Preferred stock = 14.