pid-2153467-dt-content-rid-6069205 V/courses/2020 1-BBA-B2 FIN-002-E-L-MRS-0-3369 PROBLEM 2 - Financing Choice (15 marks) Med5000 Inc. has been listed on Euronext compartment since 2005 The most recent stock price 13 euros. The Company was founded in 1992 by Jacques Martin who is still the CEO and chairman of the board of directors. The Martin family holds 60% of the company ownership and voting rights. Med 500 inc. belongs to a research intensive industry with significant investments in RRD projects. The Table below shows recent financial data about Med 5000 2019 125 350 40 9 34 30 3 Data in millions (C) Shareholders' Equity Total Assets Financial Debt Cash and Cash equivalents Profit from recurring operations Operating Profit Netcost of financial debt Average stock price Outstanding shares in millions) RATIOS Equity/Total Assets Financial Debt/Equity Net Debt/Equity Net Debt/profit from recurring operations Operating profit/Net cost of financial debt Cash/Total Assets INDUSTRY DATA Net Debt/Profit from recurring operations 2018 115 330 18 8 30 28 3 11 62 12 63 35.7% 0.32 0.25 0.91 10.00 26% 34.8% 0.33 0.26 1.00 9.33 2.4% R 1.9 1.8 REQUIRED The company in considering a new investment project whose value represent 30% of total equity. The company's CEO is contemplating two alternative financing sources. (1) use of Financial debt to fund the project or (2) new share issue capital increase) ether in the forma rights offering issue with rights) or a regular share issue without preferential subscription rights to existing shareholders Among the two financing alternatives, which one would you recommend to Med500 inc? You need to quantify the company's financing need, available debt capacity, the new share issue price and the number of shares to be issued with rights or without rights. Your answer should also discuss the pros and cons of the two financing alternatives to Med5000 Inc and explain which option you recommend to the company Your answer should be fully justified and not exceed 12 lines. C pid-2153467-dt-content-rid-6069205 V/courses/2020 1-BBA-B2 FIN-002-E-L-MRS-0-3369 PROBLEM 2 - Financing Choice (15 marks) Med5000 Inc. has been listed on Euronext compartment since 2005 The most recent stock price 13 euros. The Company was founded in 1992 by Jacques Martin who is still the CEO and chairman of the board of directors. The Martin family holds 60% of the company ownership and voting rights. Med 500 inc. belongs to a research intensive industry with significant investments in RRD projects. The Table below shows recent financial data about Med 5000 2019 125 350 40 9 34 30 3 Data in millions (C) Shareholders' Equity Total Assets Financial Debt Cash and Cash equivalents Profit from recurring operations Operating Profit Netcost of financial debt Average stock price Outstanding shares in millions) RATIOS Equity/Total Assets Financial Debt/Equity Net Debt/Equity Net Debt/profit from recurring operations Operating profit/Net cost of financial debt Cash/Total Assets INDUSTRY DATA Net Debt/Profit from recurring operations 2018 115 330 18 8 30 28 3 11 62 12 63 35.7% 0.32 0.25 0.91 10.00 26% 34.8% 0.33 0.26 1.00 9.33 2.4% R 1.9 1.8 REQUIRED The company in considering a new investment project whose value represent 30% of total equity. The company's CEO is contemplating two alternative financing sources. (1) use of Financial debt to fund the project or (2) new share issue capital increase) ether in the forma rights offering issue with rights) or a regular share issue without preferential subscription rights to existing shareholders Among the two financing alternatives, which one would you recommend to Med500 inc? You need to quantify the company's financing need, available debt capacity, the new share issue price and the number of shares to be issued with rights or without rights. Your answer should also discuss the pros and cons of the two financing alternatives to Med5000 Inc and explain which option you recommend to the company Your answer should be fully justified and not exceed 12 lines. C
