Cci Harvard Case

Continental Carriers Continental Carriers, Inc.  Advanced Financial Management  Continental Carriers, Inc. (CCI) should take on the long- circumstance debt to  finance the acquisition of interior(a) Freight, Inc. for a few reasons.  The company is heavy on assets, the debt proportionality  leave alone for only grow to 0.40  with the added $50M in debt. Also, the besotted will get from an  added $2M in a tax shield and be adapted to return $12.7M a year to its  stockholders and investors, instead of $8.9M if candor is improver to  finance the acquisition. Lastly, the stock price and earnings per  shell off will increase to $3.87 in comparison to an comeliness-financed  acquisition of $2.72 per sh are. CCI would be taking a somewhat high  risk by issuing special stock due to the uncertainty or so the  go price. Having a low P/E dimension with respect to the rest of  the market, and the replacement cost of the firm existence greater t han  its book value (argument 3), there is a true prognosis that the current  stock price and the proposed offering Although long-term debt is a better financing choice a few of the  drawbacks are pointed out. Debt holders claim profit before lawfulness  holders, so the chance that profits may be lour than expected,  increases risk to equity may reduce or chock up stock value.

However,  in extreme financial situations such as a recess period, CCI would  still be able to increase its cash during a recession period with all  debt heavy(p) structure. Also, there is a remaining 12.5 million that  would have to be nonrecreational at the expiration of the bonds, but t hat could  be paid off by issuing new bond! s or additional equity at that  time. . Introduction Continental Carriers Inc is a  truck company which focuses in carrying ecumenic commodities. From the start of its operation in 1952, the company manages within the dominion of the Pacific Coast and from dough to various places in Texas. They achieve few short term loans resulting from a low debt indemnity and evading...If you want to get a full essay, order it on our website: OrderEssay.net

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