Global Remediation is Canadian-based remediation cleaning services company towards contaminated industrial land and water sites, which was founded in 2004 in Fredericton, New Brunswick by four partners. Through its unique remediation technology that has been achieved by rigorous testing and obtainment of exclusive regulatory approvals, Global has successfully established its name as a major player in the industry. As such, Global was faced with the inevitable need to inject more capital into the company to fund its rapid growth. There was a set of criteria that we followed in order to reach to this conclusion: opportunity cost, expected growth, cost of borrowing, and corporate governance. Upon evaluation of all the criteria, we came to a conclusion …show more content…
Considering that environmental industry is growing rapidly, more companies will enter the industry and level of competition will increase, which can have a negative impact on the future growth. Also, borrowing funds to finance the expansion can be risky considering that there is a chance of decline in economy, which will result in less demand for Global’s services because of the decline in the number of development projects. In addition, if interest rate increases, it might be harder for Global to pay off the existing debt or to attain new funds to sustain the growth. Finally, raising capital to finance the company without giving up control has its limitation and might not be enough to sustain the expected level of growth in future . Selling a part of the company will provide more opportunities for raising funds and will lower the risks for MacDonald and his fellow owners, as they will not be solely responsible for all the debt. However, with such scenario there is a risk of losing the autonomy. Calculate Globals net income and earnings per share (EPS) for 2011 under each …show more content…
In “Bank Debt” alternative, a sum of $3.5 million will be injected to the company through bank loans. However, the company will have to pay an additional amount of $33,750 in interest and a principal payment of $300,000 to the bank annually over the course of 7 years. Net income will come to $489,187.50 and EPS will be 0.49. 3. In “Venture Capital” alternative, a sum of $3.5 million will be traded in exchange for 750,000 shares and 50% of the board seats, which will result in a weighted average outstanding shares of 1,375,000. Net income will come to $514,500 and EPS will be 0.29. 4. In “Strategic Partnership” alternative, Globals will receive a sum of $3.5 million to form a Join Venture of 50:50 with the property development firm, making the total outstanding shares to 2,000,000 and weighted average of 1,500,000. Net Income will come to $514,500, with an EPS of 0.26. 5. In “Preferred Shares” alternative, a local investment fund will invest $3.5 million preferred shares with a coupon rate of 7%, which will add interest expense by $245,000 annually as well as a leverage of 50% of the firm’s ownership if Globals are unable to pay dividends for two consecutive years. Total outstanding will come to 1,500,000 shares, making weighted average shares of 1,250,000. Net income will be brought to $330,750 and EPS will come up to
In SIVMED’s case, based on the definition of WACC, all capital bases should be included in its WACC. These include its common stock, preferred stock, bonds and long-term borrowings. In addition to being able to compute for the costs of capital, the WACC also determines how much interest SIVMED has to pay for all its activities. The value of the firm’s stock, which we want to maximize, depends of the after-tax cash flow. Hence, after-tax values for WACC are also needed. Furthermore, cost of capital is used to determine the cost of each debt, stock or common equity. Being able to analyze these will be essential into deciding what and how new capital should be acquired. Hence, the present marginal costs are ideally more essential than historical costs.
The reason because environmental issues were not take in consideration before, in the economic field, was due to the absence of their costs from the calculation of GNI. However, it has to be consider that future growth and in general, quality of life are strongly related to environment. Therefore, environment’s long term implications has to be taken in consideration in the economy.
Based on the optimal capital structure analysis, they should pursue as 70% debt proportion, which will give them the lowest cost of capital at 11.58%. Currently Star has no debt in their capital structure, so these new projects should begin to add debt to the company. However, no matter what debt and equity proportions are chosen for each project, the discount rate of 11.58% should be used, as the capital budgeting decisions should be independ...
... this cash to reduce the number of shares outstanding in conjunction with the reduction
From Cabot Corp’s perspective, high levels of preferred stock are riskier than common stock, as these preferred shareholders must be repaid before common shareholders, if the company goes into
For this reason, ExxonMobil should monitor the changes in prices and the markets for its products to prevent loss of profits. Moreover, the demand for petrochemicals and energy has increased due to the expanding economies. It is critical for the institution to research and analyze the relevant opportunities which can enhance the improvement of business in different regions. On the other hand, the company is under obligations to meet its social responsibility of promoting climatic conservation mechanisms and manufacture environmentally friendly products. To achieve sustainability, it is critical to adhere to all the regulations set for the purpose of avoiding costly penalties and legal cases. Accordingly, an extensive study of all the external and internal factors influencing its performance is imperative to identify issues, strengths, weaknesses and opportunities. The management should ensure that all the legal uncertainties are eradicated to steer growth and expansion of the business. Besides, litigation and control of all the risks involved should remain an approach to achieve sustainability and increase the market opportunities
The estimated free cash flows for the two strategies are $391 million for the growth strategy and $365 million for the maintain strategy. (Please refer to the excel sheet for breakdown of calculation).
According to the case study, the work of environmental managers often exposes them to many pollution prevention solutions, but they often have trouble getting access to production areas. Production often sees Environmental Managers as "the compliance police". Stakeholders The stakeholders in this case study include the corporation, the community and the countryside.
He had to consider the firm’s debt or bond rating, which was previously rated A+/A1. He had to address the minimum and maximum amount of debt the company could carry in order to remain at a rating above BB, which would keep costs low and the brand’s reputation positive in eyes of shareholders. Singh also wanted to remain flexible in regards to taking on as much debt as possible. He looked at Deluxe’s earnings before interest and taxes and assumed that the worst case would be an EBIT close $200 million, which would still guarantee investment-grade rated bonds. The last major factor that had to be taken into consideration was minimizing the cost of capital. Singh used Hudson Bancorp, where he was managing director, to estimate the cost debt and equity pre-taxes for each rating category in order to find the lowest rating, before falling to junk level, with the lowest cost of capital. Cost of debt was found by averaging the current yield to maturity of each bond rating, and the cost of equity was calculated by using the capital asset pricing
only make up 16.7% of the capital structure. Thus, the credit risk for any credit commitment was not too high
The case study is about an interview, conducted to four venture capitalists from four of the most prominent VC Silicon Valley firms, Kleiner Perkins Caufield & Byers (KPCB), Menlo Ventures, Trinity Ventures and Alta Partners. These firms invest both in seed as well as in later-stage companies, which operate mostly in the information technology sector. However, each VC has developed different sector portfolio depending on the expertise of the venture capitalists, the partner network and other factors. Professor Mike Roberts and Lauren Barley a senior research associate, both from Harvard Business School, have made a series of seven questions to their interviewees to understand how they evaluate potential venture opportunities and what they look at in order to decide if they will fund them and in which way. The questions were dealing with how VC’s evaluate potential venture opportunities, how they conduct due diligence, what process id followed for the decision making, what financial analyses is performed, the role of risk in the evaluation and how they think of potential exit routes. These questions were asked individually and revealed several similarities as well as differences in the strategy and the criteria that are used for the evaluation.
...ffer of $3,000,000/1 million shares = $3 per share. Compared to the current price per share of $2.50, this represents a 20% premium. The price per share of XYZ upon the announcement will therefore be $3, and the price per share of ABS upon the announcement will be $20 – 20% x $2.50 = $19.50.
To fund this expansion I have anticipated using a certain amount of Cash and having to invest in more property. We have decided not to issue any more shares of common stock, as cash and possible long-term debt should be a sufficient enough source of funding. Break down will be as follows: Year 1 we will use 51 million in cash leaving a balance of 3,801, and invest an additional 10 million in property increasing Property Plant and equipment to 3,021
The capital structure of a firm is the way in which it decides to finance its operations from various funds, comprising debt, such as bonds and outstanding loans, and equity, including stock and retained earnings. In the long term, firms seek to find the optimal debt-equity ratio. This essay will explore the advantages and disadvantages of different capital structure mixes, and consider whether this has any relevance to firm value in theory and in reality.