Board Of Directors Of Magik Storage Containers Limited

Issuing additional debt to finance the company expansion would worsen the company’s debt ratio as it is already more than average. The company envisions to be profitable by raising capital from existing stockholders by issuing common stock through rights offering.

This step involves short and long term debt equity analysis. The proportion of equity capital depends on the possessing and additional funds will be raised. The choice of the source of funds the company has are the issue of shares and debentures, loans to be taken from banks and financial institutions and public deposits to be drawn in form of bonds. The choice will depend on relative merits and demerits of each source and period of financing. The management of the investment funds is key in allocating that the funds are going in the correct place. The profits that are made can be down in two ways dividend declaration which includes identifying the rate of dividends and retained profits in which the volume has to be decided which will depend upon expansion and diversification of the company. The management of cash is another important function. Cash is needed for all different aspects of the company such as payment of salaries, overhead and bills. All of these are important in a company and how successful the financial aspect is going to be.The financial management practices include capital structure decision, investment appraisal techniques, dividend policy, working capital management and financial performance assessment. A company needs to have well financial in order to be successful. “A company that sells well but has poor financial management can fail.” (Johnston)

MCI would be better to keep its capital structure of 55% debt. The cost of equity is high because raising more equity will dilute the value for existing shareholders. Due to the fact that MCI has a high leverage, it is not feasible to issue debt. Additionally, MCI has exhausted the line of credit from the banks and used convertible debentures frequently. MCI belongs to a competitive and regulatory industry. The high leverage will limit its potential to grow. In exhibit 8, MCI does not have a bond rating. The convertible bond allowed the company to raise capital and convert to equity later. The interest coverage ratio of AT&T is 3.6X whereas that of MCI is 4.2X. After increasing the market share, the company can obtain a bond rating by decreasing its financial leverage.

The company position is strong enough so its better that company should use debt financing instead of equity financing.

New bank credit facility, 600 million cash on hand to take advantage of opportunities that may arise

The additional funds, especially under 3, may enable the firm to become more current on its trade credit. Also, the bonds will no doubt be subordinated debentures.

Based on the Exhibit 9A in the case, we can calculate the Source and Use of Funds. As Exhibit 1 suggests, the company require about $4.8 billion during 1984 and 1990. This is basically due to the required new capex during the same period, which will be accumulated to $10.2 billion, and the increase of cash holding, $2.0 billion, as a use of funds and the company can generate funds from operation, only $7.8 billion. Therefore, the company needs to fill the gap by sourcing external finance of about $4.8 billion. This amount will vary depending primarily on two factors; 1) whether MCI can expand market share as forecasted amid the increasing

a) How many shares will the firm have to issue, assuming they issue the new shares at the current price per share?

As shown in the ratios chart, working capital has increased by $13M. Maturities of short-term investments and cash flow from operations are projected to be sufficient to sustain the company’s overall financing needs, including capital expenditures. The following corporate strategic plan identifies a project that needs financial backing.

At first, WACC and CAPM was attempted to be used as a source of cost of capital. However, for WACC, there is no available proportion of debt and cost of debt for MW. For CAPM, no available data seems to support the acceptable

Using the AFN equation, it was calculated (assuming there were no dividends paid, and that sales were expected to grow to $3.6 million) that the amount of extra funding needed would be approximately $76,360. This amount would

Rajat Singh, a managing director at Hudson Bancorp, needs to find a way to rejuvenate the paper check corporation. One main part that needs to be calculated is the appropriate mixture of debt and equity for the firm. The company needs to determine the correct mixture so that they can both minimize the cost of capital and increase the shareholders value. I will analyze the current and future situation of the company, trying to find the correct credit rating to use that will increase income. With the new credit rating, I will be able to recommend a certain amount of debt for the company to take on and be profitable.

The Debt-Equity Ratio shows that most of the capital was in terms of ordinary shares and is becoming more reliant on Shareholders Equity than on debt to finance operations.

This capital will reduces its financial ratios so they meet the restrictions if it issues the new equity, but it might not be sustainable for the coming years because it is not reoccurring cash flow and Friendly Cards will need to borrow more capital for further growth. If the sales continue to grow at the current rate in the future the ratios could increase again. This would not be good for long-term growth due to the fact that it will sell its stock for a discount and if the other two options are executed the extra capital will not be necessary (See Exhibit 4).

Second, I will discuss any issues involved related to raising capital in the global market. When a company decides to enter the global market, it is up to management to ensure that the company is ready for such move. When raising capital in the global market, companies may have to deal with global credit facilities. Before global credit facilities decide to do business with a company, the company must first prove that the standing of the company is healthy. The company must be able to show the global credit facilities that the company’s overall financial performance is healthy and in some instances that the financial strength of the parent company is healthy as well. A common issue that a lot of companies wishing to raise capital in the global market may come across is the preparation of financial statements. Financial statements preparation varies from country to country and can be very difficult for some countries to understand or read