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In: Business and Management

Submitted By babasuwe
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Financing Capital Investments

“Compete as the highest priced, highest value-added player”
“Compete as the highest priced, highest value-added player”


INDUSTRY * Fragmented industrial distribution * Highly cyclical * Sales were down 12% as a result of the recession * 2 known competitors - Motion Industries and Kaman Bearing

Common Stock breakdown was as follows

Three things changed 1. Increased number of corporate officers 2. Expanded number of sales offices 3. Corporate goal of $1bn in sales was established

Industry Analysis: CAN SALES REALLY GTOW AT 23%

The graph above depicts the growth rate in the industry and the only time it has ever been above 20% was in 1973, however, the graph below shows the growth rate of sales for Bearings since 1981. Currently, there is a recession and having been told that the industry is highly fragmented, it is impossible to see how Bearings Inc will grow their sales from a negative of 5% to a constant 23% year on year. Nonetheless, it is important to note that their speculative growth of 23% will surpass the industry growth rate, which mean they are either planning to seriously improve their efficiency and capture customers from competitors or they are planning to increase the Industrial Market.

The key issue facing Raymond Smiley: * Mr Smiley needed to determine the best method of funding the company’s $45m need.

What options are available? 1. Equity issue 2. Contract a 20-year debenture 3. Hybrid of half equity and half debt

Compare and contrast these options based on the facts of the case and existing finance theory

Equity * There was a lack of familiarity with capital markets * It would maintain bearings reputation as a conservatively financed company * Dividend policy…...

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