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Essay / Research Paper Abstract
This 3 page paper looks at a case study supplied by the student to assess the impact that different capital raising options for two different projects will have on the debt to asset ratio and the ability to continue paying the current dividend amounts. The bibliography cites 1 source.
Page Count:
3 pages (~225 words per page)
File: TS14_TErondo7.rtf
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Unformatted sample text from the term paper:
in equipment. The second opportunity is to acquire a PVC piping company (Poly Inc), the share are currently traded, but not actively, if we assume that Rondo would need to
purchase all the 1.1 million shares at 36 each would mean the need to raise 39.6 million. In reality Rondo would only need to purchase the stock held by the
three owners as the remaining stock is held by a small number of fragmented investors, which would mean they would have little power over the running of the company.
To consider the potential of each method of fund raising we can look at the impact they would have for each of the projects. The first of the options would
be to issue more common stock. The main issue here is the cost of raising the capital in this way the stock price is currently $62, but the costs of
underwriting this would be $9 a share, meaning only $53 per share would be raised. We can look at this to assess how many shares would be issued and the
knock on effect. Figure 1 Shares that would need to be issued 5 Year project Poly Inc Amount needed 6,500,000 39,600,000 Amount raised per share 53 53 number
of shares to be issued 122,642 747,170 There are two main areas of concern, that the dividend per share remains the same, and
that the debt ratio should not be more than 50%. For this we need to look at the new total shares and the new total income, for the project
this means taking off the 40% tax, this is already allowed for in the Poly Inc accounts. First the dividends need to remain the same and this should be between
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