You\'ve owned a tool and die company for the last five years. Even during the re

Question

You've owned a tool and die company for the last five years. Even during the recession you have been earning a net profit of 30% on your investment and have been able to pay yourself a reasonable salary. You are feeling so confident that you are considering expanding. You believe that your profit potential can greatly if you could expand your product line with newer high-tech equipment. Your estimate that you will need $1000000 for the expansion. What are your financing alternatives? Would you consider selling bonds if you had to pay 12% interest?

Explanation / Answer

Possible financing alternatives Bank loan Bond issue Convertible bond issue Stock issue Leasing If you are making 30% on your investment 12% is not an unreasonable interest rate to pay.

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