Case 28 Financing Alternatives

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Company A. Boudoir’s, Inc.: This company, a retail clothing store with three suburban locations in Atlanta, Georgia, is incorporated, with each of the three Boudoir sisters owning one-third of the outstanding stock. The company is profitable, but rapid growth has put it under severe financial strain. The real estate is all under mortgage to an insurance company, the inventory is being used under a blanket chattel mortgage to secure a bank line of credit, and the accounts receivable are all being factored. With total assets of $7 million, the company now needs an additional $450,000 to finance a building and fixtures for a new outlet. Company B. Timberland Power & Light: Since Timberland Power & Light, a major electric…show more content…
To finance a higher level of output to take advantage of this increased demand, Ripe and Fresh will need approximately $550,000. Company D. Piper Pickle Company: Piper Pickle Company is a major packer of pickles and pickled products (horseradish, pickled watermelon rinds, relishes, and peppers). The company’s stock is widely held, actively traded, and listed on the New York Stock Exchange. Recently, it has been trading in the range of $18 to $22 a share. The latest 12 months’ earnings were $1.70 per share. The current dividend rate is 64 cents a share, and earnings, dividends, and the price of the company’s stock have been growing at a rate of about 7 percent over the last few years. Piper Pickle’s debt ratio is currently 42 percent versus 25 percent for other large pickle packers. Other firms in the industry, on the average, have been growing at a rate of about 5 percent a year, and their stocks have been selling at a price/earnings ratio of about 10. Piper Pickle has an opportunity to begin growing its own cucumbers, which would result in a substantial cost savings and reduce the risk involved in having to compete for cucumbers in the open market. This vertical integration would require $20 million in cash for the necessary farms and equipment. Company E. Copper Mountain Mining Company: Copper Mountain Mining needs $12 million to finance the acquisition of mineral rights to some land in south central New Mexico and to pay

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