Is there a good rationale for raising $30 to $60 million at the time of the case?
What do you estimate the company’s value (total and per share) to be as of March 2007? This does not mean looking back and reading from history. It means estimating value as we have done before – projected net cash flows have to be appropriately discounted. Estimate the discount rate. The resultant estimated company value can be checked using market multiples of comparable companies.
Consider the debt vs. equity discussion.
How much value would be created if $50 million debt were to be added?
Would the Weighted Average Cost of Capital change? How?
What would EPS be under the two alternatives at a low future EBITDA? At a high future EBITDA?
Is debt or equity preferable?
What is the condition of the equity markets? Is an IPO at the time of the case a good bet? Which party benefits from the sale?
Recommend a course of action to Mr. McDonald
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