Case 28 Julian Eastheimer & Company

Case 28 Julian Eastheimer & Company

A. Boudoir’s Inc. should use a leasing arrangement to finance the building. The company has already factored all of its accounts receivable, so that is not an option. All of its real estate and inventory are already being used as collateral for other debt, therefore loans are not an option. Leasing would be the best option for this company, so that the sisters do not have to forfeit any of their ownership in the company.

B. Timberland Power and Light should use long-term bonds to finance the additional $37 million. The company’s current long term debt is 60 percent. If it uses long-term bonds to finance, its long-term debt would become 62.5 percent which is still acceptable by the Securities and Exchange Commission.

C. Ripe and Fresh Canning Company should use factoring to finance the $550,000 needed. Since the company’s plant and equipment have already been financed by a mortgage loan, they should not incur any more debt at this time. This company sells its products on 60-day credit terms. Factoring would allow the company to receive cash more quickly than it would by waiting 60 days for a customer payment.

D. Piper Pickle Company should use common stock: rights offering to finance the $20 million needed because the company’s stocks are already being actively traded and its earnings, dividends, and price of stock have been growing at a rate of 7 percent over the last few years.

E. Copper Mountain Mining Company should use debt with warrants to finance the additional funds needed because the company’s debt ratio is below the industry average. It should be able to borrow funds at a reasonable interest rate.

F. Bull Gator Saloon and Dance Hall should use friends or relatives to finance funds needed. Robert Radcliffe does not have an established business, therefore, borrowing from family and friends would be the most realistic option.

G.