k. Review the following press release by Weis Markets relating to planned capita
ID: 2338227 • Letter: K
Question
k. Review the following press release by Weis Markets relating to planned capital expenditures: "Vice Chairman Jonathan Weis today said his company would invest $80 million in its growth over the next twelve months. Mr. Weis made the announcement at his companys annual shareholder meeting, which was held in Sunbury earlier today. For the coming year, we plan to invest nearly $80 million in our growth We will target three quarters of this budget to our store base, said Mr. Weis. "We currently have 19 major projects in various stages ofplanning, including three new stores, tworeplacementunits, nine additions andfive remodels. Mr. Weis noted this was a 23% increase over 2007, when his company made $64.2 million in capital expenditures. Discuss Weis Markets' capacity for increasing its capital expenditures. What are the likely sources of cash to fund the increased level of investment in property and equipment?Explanation / Answer
The “Weis Markets” company is a retailing company who is selling products through its owned stores. Thus, the only way to achieve growth in business is through increasing sales through its stores and capital expenditures in creating fixed assets like Stores and godowns alongwith the working capital or floating stocks will enhance its business.
Thus, the “Weis Markets” company is having advantage in putting its capital in creating new stores, adding replacement units and remodeling the old stores.
The Various sources of raising cash for the funding to its growth investment in property and equipment are the (i) Issuing capital shares to raise long term permanent capital , (ii) Long term loans at low interest rate and (iii) Internal accruals. This is because investment in properties and equipment will have a long returning capability, long term and permanent funds should be raised to fund all these capital investments.
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