A time machine has taken us 2 years into the future and you have been asked to make some recommendations to the company regarding financing for an upcoming major expansion. The company has been very successful but they will need a major inflow of cash to purchase the fixed assets they need for the expansion and hire additional employees. They believe they will need at least $1,500,000 and have asked for your recommendations as to how they should obtain the necessary funds. They have provided information about their available financing options and have asked you to evaluate them and make a recommendation as to which option they should pursue. They have also asked for depreciation schedules for the new assets they plan to purchase. Finally they have asked for information about the cash inflows they can expect from each of the financing options and the expected annual cash outflow required for each financing option. They also request a calculation of several ratios under each of the financing alternatives.
When you need information about Assets for any of the ratio calculations, remember that Assets = Liabilities + Equity. Also, assume the split between Current Assets and Long Term Assets is 20% current and 80% long term. The included post closing trial balance represents the year end information for August 31, 2018. (The company’s fiscal year is from September 1 to August 31). You have been asked to consider the company’s financing options and provide the company with a 3-4 paragraph recommendation as to which opportunity they should pursue. (a blank sample memo format is posted on the class Blackboard site under the Projects button with the 3rd project information) The information about the various financing opportunities available is provided in this project information. You are also provided information regarding the plant asset purchases the company plans with the cash inflows.
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