GonzalesFood Store

Group Integrative Problem 1 FINA 5260: Principles of Finance

Gonzales Food Stores is a family-owned grocery store chain headquartered in El Paso.However, the owner doesnt know much about business. Asaresult, you are hired to make recommendations concerning financing needs for the following situations.

PartI :Initial Expansion Gonzales is a close I held corporation considering a major expansion . The proposed expansion would require the firm to raise $10 million in additional capital. Because Gonzales currently has 50 percent debt and because the family members already have all their funds tied up in the business, the owners cannot supply any additional equity, so the company will have to sell stock to the public. The family wants to ensure that it will retain control of the company. This offering would be Gonzales s first stock sale, and the owners are not sure exactly what would be involved. For this reason, they have asked you to research the process and to help them decide how to raise the needed capital. In doing so, you should answer the following questions:

• What is classified stock? Would Gonzales find any advantage in designating the stock currently outstanding as founders shares? What type of common stock should Gonzales sell to the public to allow the family members to retain control of the business?