Copy of Warrant+Convertible+Decisions

Copy of Warrant+Convertible+Decisions - The Howland Carpet...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
The Howland Carpet Company has grown rapidly during the past 5 years. Recently, its commer to consider increasing its permanent financing. Its bank loan under a line of credit has risen to $ interest rate. Howland has been 30 to 60 days late in paying trade creditors. Discussions with an investment banker have resulted in the decision to raise $500,000 at this ti assured the firm that the following alternatives are feasible (flotation costs will be ignored): Alternative 1: Sell common stock at $8. Alternative 2: Sell convertible bonds at an 8 percent coupon, convertible into 100 shares of com bond (that is, the conversion price is $10 per share). Alternative 3: Sell debentures at an 8 percent coupon, each $1,000 bond carrying 100 warrants John L. Howland, the president, owns 80 percent of the common stock and wishes to maintain hundred thousand shares are outstanding. The following are extracts of Howland's latest financ Balance Sheet Current Liabilities $400,000 Common stock par $1 $100,000 Retained earnings $50,000 Total assets $550,000 Total claims $550,000 Income Statement Sales $1,100,000 All costs except interest $990,000 EBIT $110,000 Interest $20,000 EBT $90,000
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/18/2011 for the course BUSN 5000 taught by Professor Online during the Spring '10 term at Webster.

Page1 / 6

Copy of Warrant+Convertible+Decisions - The Howland Carpet...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online