I need help on these problems!

1)A startup consumer products firm has two owners who are both in low tax brackets.The corporation expects rapid earnings growth over the next five years.What should it consider when deciding on internal versus external financing?(The company is a C corporation.)

2)Related to the above question, the firm, which manufactures designer sunglasses, has been in operation for five years.It is organized as an S corporation, with its two owners (each having half of the stock) the president and vice president.Its current financials look as follows ($millions):

After consistent double-digit sales growth in its first five years, the company projects 20% growth for the next five.It would like to spend $30 million on a new plant, and is contemplating the following alternatives:

oBank borrowing, at 10%, secured by the property, payable over 10 years;

oInternal financing;

oFloating an initial bond issue at 8% principle due in 10 years; or

oAn initial public offering (IPO) of voting common stock.

What recommendation do you have?What other information might you need?

3)A majority of hi-tech firms which seek external financing first do so with a private placement of common stock, followed by public initial public offerings (IPO) of stock.Debt is typically never issued.Why do you think that is?

4)You plan to build a new plant at an estimated cost of $10 million. You set up a construction loan at 8%, with the interest rolling into the balance. At the completion of the plant, the entire amount will convert into a conventional mortgage at 6% over 30 years. You expect the plant to be built over the course of 6 months, with the expenses to be incurred at follows:

Purchase of land, $1 million, January 2015

Frame-in the building, $1 million, January 2015

Exterior walls, $3 million, February 2015

Electrical and Plumbing, $2 million ratably over February and March 2015

Sheetrock and finishing $2 million ratably over April and May.

Even though you set up the loan for $10 million, hopefully you won't need the extra $1 million. Given the above information, estimate the amount of the final mortgage. Assume interest is accrued monthly, using an average daily balance..

Assignment 3 1) A startup consumer products firm has two owners who are both in low tax brackets. The corporation expects rapid earnings growth over the next five years. What should it consider when deciding on internal versus external financing? (The company is a C corporation.) 2) Related to the above question, the firm, which manufactures designer sunglasses, has been in operation for five years. It is organized as an S corporation, with its two owners (each having half of the stock) the president and vice president. Its current financials look as follows ($millions): Income Statement For the Year ended 2/ 12/ 31/ 31/ 04 97 Sales C ost of good sold Gross profit Operating expenses Interest Taxes Net Income 12.5 2.5 10.0 1.0 .5 .0 $8.5 Balance Sheet For the year ended 12/ 12/ 31/ 31/ 97 2004 Assets C ash Accounts receivable Property, plant, and equipment (net) Liabilities & Equity $35.0 1.0 5.0 $41.0 Accounts payable $.5 C ommon stock Retained earnings .5 40.0 $41.0 After consistent double-digit sales growth in its first five years, the company projects 20% growth for the next five. It would like to spend $30 million on a new plant, and is contemplating the following alternatives: o Bank borrowing, at 10%, secured by the property, payable over 10 years; o Internal financing; o Floating an initial bond issue at 8% principle due in 10 years; or o An initial public offering (IPO) of voting common stock. What recommendation do you have? What other information might you need? 3) A majority of hi-tech firms which seek external financing first do so with a private placement of common stock, followed by public initial public offerings (IPO) of stock. Debt is typically never issued. Why do you think that is? 4) You plan to build a new plant at an estimated cost of $10 million. You set up a construction loan at 8%, with the interest rolling into the balance. At the completion of the plant, the entire amount will convert into a conventional mortgage at 6% over 30 years. You expect the plant to be built over the course of 6 months, with the expenses to be incurred at follows: Purchase of land, $1 million, January 2015 Frame-in the building, $1 million, January 2015 Exterior walls, $3 million, February 2015 Electrical and Plumbing, $2 million ratably over February and March 2015 Sheetrock and finishing $2 million ratably over April and May. Even though you set up the loan for $10 million, hopefully you won't need the extra $1 million. Given the above information, estimate the amount of the final mortgage. Assume interest is accrued monthly, using an average daily balance