2) Related to the above question, the firm, which manufactures designer sunglasses, has been in operation for five years. It is organized as an Scorporation, with its two owners (each having half of the stock) the president and vice president. Its current financials look as follows (Smillions): Income Statement For the Year ended 2/31/04 12.5 2.5 10.0 Sales Cost of good sold Gross profit Operating expenses Interest Taxes Net Income 1.0 .5 .0 $8.5 Balance Sheet For the year ended 12/31/2004 Assets Llabilities & Equity $35.0 1.0 Accounts payable $.5 Cash Accounts receivable Property, plant, and equipment (net) 5.0 Common stock Retained earnings .5 40.0 $41.0 $41.0 After consistent double-digit sales growth in its first five years, the company projects 20% growth for the next five. It would like to spend $30 million on a new plant, and is contemplating the following alternatives: o Bank borrowing, at 10%, secured by the property, payable over 10 years. Total cost $77,812,273.80 o Internal financing Floating an initial bond issue at 8% principle due in 10 years; or An initial public offering (IPO) of voting common stock What recommendation do you have? What other information might you need? 0