AutoShine, Inc. who currently supplies Car Wash Products has decided to expand its operations to owning and operating car washes. The following is an excerpt from the conversation between the chief executive officer of AutoShine , Larry VanWinkle, and the vice president of finance of AutoShine, John Clancy: Larry to John: John, have you given any thought to how we're going to manage the acquisition of Wash and Shine Car Wash? John: Well, the two basic options, as I see it, are to issue either preferred stock or bonds. The equity market is a little depressed right now and I have heard through the rummer mill, that the Federal Reserve Bank's going to increase the interest rates either this month or next. Larry: Yes. I've heard that rumor. The problem is that we can't wait around to see what's going to happen. We'll have to move on this quickly if we want any chance to complete the acquisition of Wash and Shine Car Wash. John: Well, the bond market is really strong right now. Maybe we should issue debt this time around. Larry: My thoughts exactly! Wash and Shine has a strong balance sheet, however it's cash flows and income are a little volatile. But that's characteristic of the car wash industry. REQUIRED: What are two advantages and disadvantages of AutoShine issuing preferred stock versus bonds to complete their acquisition of Wash and Shine Car Wash. Remember that AutoShine (the Company) issuing the bonds or the preferred stock , be sure to discuss this from the Company's point of view not the investor's point of view.
AutoShine, Inc. who currently supplies Car Wash Products has decided to expand its operations to owning and operating car washes. The following is an excerpt from the conversation between the chief executive officer of AutoShine , Larry VanWinkle, and the vice president of finance of AutoShine, John Clancy:
Larry to John: John, have you given any thought to how we're going to manage the acquisition of Wash and Shine Car Wash?
John: Well, the two basic options, as I see it, are to issue either preferred stock or bonds. The equity market is a little depressed right now and I have heard through the rummer mill, that the Federal Reserve Bank's going to increase the interest rates either this month or next.
Larry: Yes. I've heard that rumor. The problem is that we can't wait around to see what's going to happen. We'll have to move on this quickly if we want any chance to complete the acquisition of Wash and Shine Car Wash.
John: Well, the bond market is really strong right now. Maybe we should issue debt this time around.
Larry: My thoughts exactly! Wash and Shine has a strong
REQUIRED: What are two advantages and disadvantages of AutoShine issuing preferred stock versus bonds to complete their acquisition of Wash and Shine Car Wash. Remember that AutoShine (the Company) issuing the bonds or the preferred stock , be sure to discuss this from the Company's point of view not the investor's point of view.
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
