In: Accounting
Early in the 2020, Baladna Co. prepared an expansion plan. The plan requires an increase in in both property, plant and equipment and inventory by $190,000,000 and $10,000,000 respectively. The following three alternative financing plans have been suggested by the firm’s investment bankers:
Plan I: issue preferred stock at par.
Plan II: issue common stock at $10 per share.
Plan III: issue a 16% long-term bonds, due in 20 years, at par ($1,000).
Plan A:
Plan B:
Plan C:
BALADNA CO. |
Balance Sheet as of December 31, 2019 (in thousands) |
Assets |
Current assets: |
Cash $ 50,000 |
Accounts receivable 60,000 |
Inventory 106,000 |
Total current assets $216,000 |
Property, plant, and equipment $504,000 |
Less: Accumulated depreciation 140,000 364,000 |
Patents and other intangible assets 20,000 |
Total assets $600,000 |
Liabilities and Stockholders’ Equity |
Current liabilities: |
Accounts payable $ 46,000 |
Taxes payable 15,000 |
Other current liabilities 32,000 |
Total current liabilities $ 93,000 |
Long-term debt 100,000 |
Stockholders’ equity: |
Preferred stock ($100 par, 10% cumulative, 500,000 shares |
authorized and issued) 50,000 |
Common stock ($1 par, 200,000,000 shares authorized, |
100,000,000 issued) 100,000 |
Premium on common stock 120,000 |
Retained earnings 137,000 |
Total liabilities and stockholders’ equity $600,000 |
Please find the attached sheets,
Please comment for any additional explanation.
Thanks,