Case $28$

Julian Eastheimer and Company

Special Topics

Directed

While investment banking firms traditionally hire relatively few new graduates $($especially those without advanced degrees$),$ the positions they do fill are highly sought after and are extremely lucrative. Prime candidates not only need to have knowledge of the financial markets, but also must have the ability to sell their firm's services to some of the most successful members of the financial community. Quite often, knowledge of oenology, a person's ancestry, and a scratch golf game have just as much persuasive power in obtaining a client's business as do the actual services provided by a firm such as Julian Eastheimer and Company.

Through an old family contact pulling the right strings, Parker Z$.$ Bentley III was fortunate enough to obtain the job of assistant to Maria Talbot, a senior partner and managing director at Julian Eastheimer. Bentley received his bachelor's degree in physical education from a very expensive and prestigious Ivy League school only two weeks ago, and this is his first day on the job. After a rather pleasant morning spent meeting various people around the office, Bentley was given his first task$-$he was asked to review the financing recommendations that Talbot had recently made for nine client firms.

The first thing Bentley did was to pull out the financial analyses and recommendations from the clients' folders and give them to one of the secretaries to type. When the secretary returned the typed reports, Bentley discovered that he did not know which recommendation belonged to which company! He had folders for nine different companies and financing recommendations for nine companies, but he could not match them up$.$ Bentley's major was physical education, so he could not be expected to match the financing recommendations with the appropriate companies.

QUESTIONS

As a finance student, you should be able to help Bentley by telling him which companies in Section B should use the financing methods listed in Section A$.$

Section A

Leasing arrangement

Long$-$term bonds

Debt with warrants

Case $12$: Julian Eastheimer and Company: Directed

compete for cucumbers in the open market. This vertical integration would require $$20$ million in cash for the necessary farms and equipment.

E$.$ Copper Mountain Mining Company: Copper Mountain Mining needs $$12$ million to finance the acquisition of mineral rights to some land in south central New Mexico and to pay for some extensive surveys, core$-$borings, magnetic aerial surveys, and other types of analyses designed to determine whether ment. If the tests are favorable, the company will need deposits on this land warrant developMountain Mining's common stock is currently selling at $$11,$ while the million. Copper approximately $$1$ per share. Other firms in the industry sell at from $8$ to $13$ tany is earning Copper Mountain's debt ratio is $30$ percent, compared to an industry averages earnings. Total assets at the last balance sheet date were $$120$ million.

F$.$ Bull Gator Saloon and Dance Hall: Robert Radcliffe, a professor at the University of Florida, is an avid country$-$and$-$western music fan and a square dancer. He has just learned that a recently developed downtown shopping and entertainment center still has a lease available for the original, renovated building of the First National Bank of Gainesville. The bank outgrew the building in the late $1950$ s$,$ and the large open spaces and high ceilings would be ideal for a country$-$and$-$western nightclub. Radcliffe knows the market well and has often noted the lack of a real "kicker bar" in Gainesville; the closest being in Starke, about $25$ miles from Gainesville. Radcliffe believes that if he can obtain approximately $$50,000$ for a sound system and interior decorations, he can open a small but successful operation in the old bank building. His liquid savings total $$15,000,$ so Radcliffe needs an additional $$35,000$ to open the proposed nightclub.

G$.$ Golden Gate Aircraft Corporation: Golden Gate Aircraft is a medium$-$sized aircraft company located just outside San Francisco whose sales distribution is approximately $30$ percent for defense contracts and $70$ percent for nonmilitary uses. The company has been growing steadily in recent years, and projections based on current research$-$and$-$development prospects call for continued growth at a rate of $5$ percent to $7$ percent a year. Although recent reports of several brokerage firms suggest that the firm's rate of growth might be slowing down because of the high price of fuel and the softness of the business aircraft market, Golden Gate's management believes, based on internal information, that no decline is in sight. The company's stock, which is traded on the Pacific Stock Exchange, i