BnB Caribbean Inc. (BnB) is a leading construction company founded in 2001 and is based in Jamaica. The company has within recent years been experiencing increases in revenues from its construction related services such as design, build, expansion and remodeling, and emergency services. It's main line of business is from the construction of roads and commercial buildings within Jamaica and to a lesser extent a few other Caribbean countries. Since the growth of the tourism sector in the Caribbean, BnB Caribbean has become concerned about the number of other construction companies which have entered the market to provide similar services around the Caribbean region. Business overseas contributes to 40% of the company's revenues, while the other 60% comes mainly from works done in the domestic market. The COVID-19 pandemic has caused a slowdown in overall operations leading to prolonged delays in delivery of raw materials from abroad. The CEO of the company is optimistic that there will be a turnaround in operations in 2021, and is therefore considering contracting a loan of $500.0 Million from its local bank to help rebuild its lead position in the market and to expand its line of business to include the sales of heavy equipment. The company has over the years relied mainly on issuing long-term bonds to finance its capital projects. As of today, the firm has 50.0 million shares of common stock outstanding. You are hired as the Chief Financial Controller of the company to advise the CEO and board of the company of the current financial health of the company and to assist them in determining whether they would be successful with the new loan. You began by gathering the following financial statements and other data about the firm. BnB Construction Inc. Balance Sheet (Millions of Dollars) 2020 2019 Liabilities Assets 2021 Est 2021 Est 2020 2019 15 10 15 Accounts payable 115 60 30 10 0 65 Overdrafts 115 110 60 315 140 130 Cash and Cash Equivalents Short-Term investments Accounts Receivable Inventories Total Current Assets Net Plant and Equipment 420 700 375 615 260 490 415 310 220 1,145 1,000 810 1300 754 580 1884 1,190 870 1790 1,064.00 800 Accruals Total Current Liabilities Long-Term Bonds and New Loan Total Debt Preferred Stock Common Stock Retained Earnings Total Common Equity Total Liabilities and Equity 40 40 130 1069 1199 $ 3,029 130 956 1086 $ 2,190 40 130 710 840 $ 1,680 Total Assets $ 3,029 $ 2,190 $ 1,680 2019 2.850 Est. Estimate BnB Construction Inc. Income Statement (Millions of Dollars) 2021 Est. 2020 Net Sales 4,000 3,000 Operating costs 3,100 2,300 EBITD 900.00 700 Depreciation 110 100 Amortizaton 0 0 Depreciation and Amortization 110 100 EBITD 790 600 Interest 100 88 Earnings Before Taxes 690 512 Taxes (40%) 276 204.8 Net Income Before preferred Dividends 414 307.2 Preferred Dividends 4 4 Net Income $ 410.0 $ 303.2 Common Dividends 57.5 57.5 Addition to retained Earnings $ 352.50 $ 245.70 2,100 750 90 0 90 660 60 600 240 360 356.0 4 $ 53 $ 303.0 Per Share Date Common Stock Price 2021 $ 2020 28.0 $ 2019 $ 23.00 26.00 7.12 1.06 Earnings Per Share (EPS) Dividend Per Share (DPS) Book Value Per Share (BVPS) Cash Flow Per Share ??? ???? ???? ???? $ $ $ $ 6.06 $ 1.15 $ 21.72 $ 8.06 $ 16.80 8.92 Required: As the newly-appointed Chief Financial Officer of BnB Construction Inc. write a report of no more than three pages, font size 12, Times New Roman, 1.5 line spaces (excluding the reference page) to the board which discusses whether the company is likely to be successful if it approaches its bank Republic Limited for a loan to undertake the expansion project at a cost of $500.0 million. Your discussion should include a critical analysis of the current financial position and recent financial performance of the company (liquidity, profitability, leverage, asset management, market value- 2 to 3 ratios for each category). The report should comment on whether the firm has a great chance of success with the loan or whether alternative forms of financing should be sought. Give justification for your answer. Other guidance notes: BnB Caribbean Inc. (BnB) is a leading construction company founded in 2001 and is based in Jamaica. The company has within recent years been experiencing increases in revenues from its construction related services such as design, build, expansion and remodeling, and emergency services. It's main line of business is from the construction of roads and commercial buildings within Jamaica and to a lesser extent a few other Caribbean countries. Since the growth of the tourism sector in the Caribbean, BnB Caribbean has become concerned about the number of other construction companies which have entered the market to provide similar services around the Caribbean region. Business overseas contributes to 40% of the company's revenues, while the other 60% comes mainly from works done in the domestic market. The COVID-19 pandemic has caused a slowdown in overall operations leading to prolonged delays in delivery of raw materials from abroad. The CEO of the company is optimistic that there will be a turnaround in operations in 2021, and is therefore considering contracting a loan of $500.0 Million from its local bank to help rebuild its lead position in the market and to expand its line of business to include the sales of heavy equipment. The company has over the years relied mainly on issuing long-term bonds to finance its capital projects. As of today, the firm has 50.0 million shares of common stock outstanding. You are hired as the Chief Financial Controller of the company to advise the CEO and board of the company of the current financial health of the company and to assist them in determining whether they would be successful with the new loan. You began by gathering the following financial statements and other data about the firm. BnB Construction Inc. Balance Sheet (Millions of Dollars) 2020 2019 Liabilities Assets 2021 Est 2021 Est 2020 2019 15 10 15 Accounts payable 115 60 30 10 0 65 Overdrafts 115 110 60 315 140 130 Cash and Cash Equivalents Short-Term investments Accounts Receivable Inventories Total Current Assets Net Plant and Equipment 420 700 375 615 260 490 415 310 220 1,145 1,000 810 1300 754 580 1884 1,190 870 1790 1,064.00 800 Accruals Total Current Liabilities Long-Term Bonds and New Loan Total Debt Preferred Stock Common Stock Retained Earnings Total Common Equity Total Liabilities and Equity 40 40 130 1069 1199 $ 3,029 130 956 1086 $ 2,190 40 130 710 840 $ 1,680 Total Assets $ 3,029 $ 2,190 $ 1,680 2019 2.850 Est. Estimate BnB Construction Inc. Income Statement (Millions of Dollars) 2021 Est. 2020 Net Sales 4,000 3,000 Operating costs 3,100 2,300 EBITD 900.00 700 Depreciation 110 100 Amortizaton 0 0 Depreciation and Amortization 110 100 EBITD 790 600 Interest 100 88 Earnings Before Taxes 690 512 Taxes (40%) 276 204.8 Net Income Before preferred Dividends 414 307.2 Preferred Dividends 4 4 Net Income $ 410.0 $ 303.2 Common Dividends 57.5 57.5 Addition to retained Earnings $ 352.50 $ 245.70 2,100 750 90 0 90 660 60 600 240 360 356.0 4 $ 53 $ 303.0 Per Share Date Common Stock Price 2021 $ 2020 28.0 $ 2019 $ 23.00 26.00 7.12 1.06 Earnings Per Share (EPS) Dividend Per Share (DPS) Book Value Per Share (BVPS) Cash Flow Per Share ??? ???? ???? ???? $ $ $ $ 6.06 $ 1.15 $ 21.72 $ 8.06 $ 16.80 8.92 Required: As the newly-appointed Chief Financial Officer of BnB Construction Inc. write a report of no more than three pages, font size 12, Times New Roman, 1.5 line spaces (excluding the reference page) to the board which discusses whether the company is likely to be successful if it approaches its bank Republic Limited for a loan to undertake the expansion project at a cost of $500.0 million. Your discussion should include a critical analysis of the current financial position and recent financial performance of the company (liquidity, profitability, leverage, asset management, market value- 2 to 3 ratios for each category). The report should comment on whether the firm has a great chance of success with the loan or whether alternative forms of financing should be sought. Give justification for your answer. Other guidance notes