Cash for the necessary farm and equipment

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Reference no: EM131257622

Which finance method from Section A is best for this company and provide a brief explanation why?

Section A

1. Long-term bonds

2. Common stock:nonrights

3. Preferred stock (nonconvertible)

4. Factoring (Factoring is the selling of a firm's accounts receivable)

Company

Piper Pickle Company is a major packer of pickles and pickled products (horseradish pickled watermelon rinds, and relish, and peppers). The company's stock i widely held actively traded and listed on the New York Stock Exchange. Recently it has been trading in the range of $18 to $22 a share. The latest 12 months' earnings were $1.70 per share. The current dividend rate is 64 cents a share, and earnings, dividends, and the price of the company's stock have been growing at a rate of about 7 percent over the last few years. Piper Pickle's debt ratio is currently 42 percent versus 25 percent for other large pickle packers. Other firms in the industry, on the average, have been growing at a rate of about 5 percent a year and their stock have been selling at a price/earrings ration of about 10. Piper Pickle has an opportunity to begn growing its own cucumbers, which would result in a substantial cost savings and reduce the risk involved in having to compete for cucumbers in the open market. This vertical intergration would require $20 million in cash for the necessary farm and equipment.

Reference no: EM131257622

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