Tiffany Case

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Question 1a: Tiffany should go public since an IPO would be able to bring in fresh equity to fund growth, and to establish a relatively liquid and efficient market for the company 's shares. Tiffany has a strong brand and would be able to attract investors during the IPO process. Tiffany option of IPO was favorable since it had positive operating results for the past months. Since the terms of renegotiating the terms of the GECC revolving credit were not encouraging , management of Tiffany consideration of getting funding via the IPO route made sense. IPO would help the management of Tiffany to repay GECC completely and free the company to make alternative borrowing arrangements. Since the operating cash-flows where not steady,…show more content…
Most term loans require a 10-20% down payment. Personal Credit. Leases do not show up on Amazon Mines’s personal credit report. Bank loans will show up on its credit report and may keep it from getting further credit . Improved Cash Forecasting. The lessee knows the amount and number of lease payments so they can accurately forecast the cash requirements for equipment. Upgraded technology. If the nature of Amazon Mines industry demands that they have the latest technology, a short-term operating lease can help it get the equipment and keep their cash. Amazon Mines risk of getting caught with obsolete equipment is lower because it can upgrade or add equipment to meet its ever-changing needs.. A lease provides the use of equipment for specific periods of time at fixed payments. The lessor assumes and manages the risk of equipment ownership. Flexibility. As Amazon Mines business grows and it needs change, it can add or upgrade at any point during the lease term through add-on or master leases. Question 3: A young firm NCI Corporation builds wind power driven energy systems. It is considering raising $400 million in debt capital for an expansion project and can issue bank debt at 16% or junk bonds at a yield of 14%. (a) Explain why bank debt is more expensive than public debt (b) Discuss the major pros and cons of each alternative for NCI. Bank debt vs Public Debt: Private debt comprises bank-loan type

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