3 Pg Mining Inc A Publicly Traded Nyse Lse Tse Company Has Just Signed A New 10 Year Sales Contract Sales Contra 1 (205.6 KiB) Viewed 50 times
3. PG Mining Inc., a publicly traded (NYSE, LSE, TSE) company has just signed a new 10 year sales contract: Sales Contract - $250 million per year for 10 years - guaranteed by the US Department of the Treasury (assumed Risk Free). You are also provided with the following information on PG Mining: Annual Sales Gross Profit Margin $2,500 million 40% $50 Current Stock Price Current Earnings per share (fully diluted) $1.50 $500 million Capital Structure: 20 year subordinated bond (10% coupon - 2 interest payments per year - trading at $125 - par $100) Preferred Stock (6% coupon - trading - at $100, par $100) Common Stock Retained Earnings $250 million $100 million $650 million Total Capital $1,500 million PG Mining has been offered $1,500 million for its new sales contract by GFC Investments. PG Mining is also planning to initiate a $1,000 million mining operation equipment overhaul. PG has consulted with it's investment banker (RSG Investments) about funding this project by issuing Bonds, Preferred Stock or Common Equity and has been advised that the markets for debt, preferred stock and common stock are willing to purchase those securities at current pricing. You are asked to provide an analysis on what measures you would utilise to fund the $1,000 million mining equipment project.
B) If you could only choose one option from those available, which one would you recommend? C) If you were asked to design a funding package of two available funding options of ($500 million each) which two would you recommend. Please provide the rationale for your recommendations (Financial costs, financial impacts and overall risk profile changes) to B) and C).
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