The Service and Maintenance Company requires a capital infusion of $200,000. It is currently a closely held corporation with less than 50 shareholders. Although the shareholders are not all related to each other, they all know each other and they view the business as a family business.

Please refer to the financial statements available here.

A number of alternatives are available to the company. It can:

1. Obtain private debt financing Seek out a private investor(s) who would be willing to share ownership

2. Seek out offers for a private buy-out Issue public debt (corporate bonds)

3. Issue public common stock

- Please discuss the impact and implications of each alternative?

- Considering the size of the investment ($200,000) how does this impact the financial statements?

- Please provide a discussion of the impact of each alternative which would include issues of structure and cost of capital?

- Make a narrative about the impact of an infusion of capital of $200,000 on the financial statements?

Income statement:

2014 2013

Service Contract Revenues 9,700,000 6,295,400

Service Contract Costs (7,503,100) (4,957,800)

Gross Profit 2,196,900 1,337,600

General and Administrative Expenses (896,000) (756,000)

Operating Income 1,300,900 518,600

Gain on sale of equipment 59,900 7,700

Interest expense (69,500) (70,800)

Other expense (9,600) (63,100)

Income before taxes 1,281,700 455,400

Taxes (451,700) (300,900)

Net Income 830,000 154,500

Retained Earnings, Beginning Balance 1,057,500 1,053,000

1,887,500 1,207,500

Less: Dividends paid 0 (150,000)

Retained Earnings, Ending Balance 1,887,500 1,057,500

Balance Sheet:

ASSETS 2014 2013

CURRENT ASSETS

Cash 456,500 222,400 105%

Receivables 3,936,400 3,320,000 18%

Inventory 89,800 100,200 -10%

Other assets 119,500 84,300 41%

Total current assets 4,602,200 3,726,900 23%

LONG TERM ASSETS

Note Receivable 380,600 280,700 35%

Equipment (net of depreciation) 975,000 1,017,800 -4%

Total long term assets 1,355,600 1,298,500 4%

TOTAL ASSETS 5,957,800 5,025,400 18%

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable 2,783,100 2,805,700 -0.80%

Note payable (current maturities) 177,550 172,550 2%

Other accrued liabilities 165,300 114,600 44%

Total current liabilities 3,125,950 3,092,850 1%

LONG TERM LIABILITIES

Notes payable (long term) 354,800 354,800 0

Long term accrued liabilities 289,550 220,250 31%

Total long term liabilities 644,350 575,050 12%

TOTAL LIABILITIES 3,770,300 3,667,900 2%

STOCKHOLDERS' EQUITY

Common stock 300,000 300,000 0

Retained Earnings 1,887,500 1,057,500 78%

Total stockholders' equity 2,187,500 1,357,500 61%

TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

5,957,800 5,025,400 18%