Posted: February 22nd, 2015

Financial Analysis

Paper, Order, or Assignment Requirements

Introduction:

Competition Bikes Inc. is considering an expansion to Canada and is trying to determine whether to merge with or acquire the Canadian Biking Inc. facility. Part of the consideration in the decision to merge with Canadian Biking, Inc. or to acquire Canadian Biking is the source and management of the working capital for the operation. In this task, you will prepare a summary report that analyzes the proposed expansion.

Task:

A. Prepare a summary report in which you do the following:
1. Recommend a detail capital structure approach that maximizes shareholder return.
a. Justify your recommendation (Spreadsheet tab: Task 3_Capital_Structure).

Note: The justification should consider all of the capital structure options available.

2. Discuss areas that raise concern related to Net Present Value and Internal Rate of Return (Spreadsheet tab: Task 3_Capital_ Budgets).
3. Discuss how working capital can be properly obtained and managed for the Canadian expansion. The discussion should consider the lease-versus-buy analysis (Spreadsheet tab: Task 3_Lease vs Buy).

Note: There are three sections to A.3. (1) Discuss how working capital can be properly obtained, (2) disucss how working capital can be properly managed, and (3) discuss which option preserves working capital: Lease vs Buy.

4. Discuss whether Competition Bikes Inc. should merge with or acquire the Canadian Biking Inc. facility (Spreadsheet tab: Task 3_Merger_Acquisition).