Storm Cellars is the leading manufacturer of wine in North Carolina. Demand for
ID: 2760216 • Letter: S
Question
Storm Cellars is the leading manufacturer of wine in North Carolina. Demand for Storm Cellars wine has been growing at an exponential pace. In fact, their wine is being demanded by customers and restaurants across the country. Because Storm Cellars is finding it difficult to keep up with demand, they need to build a new wine processing plant in order to increase their production capacity. The projected cost for the new plant is 30 million dollars. Please respond to the following questions:
Why might Storm Cellar consider raising this money through debt financing? What would be the advantages/disadvantages of using debt financing?
Why might Storm Cellar consider raising this money through equity financing? What would be the advantages/disadvantages of using equity financing?
If you were a personal investor and Storm Cellars chose to raise the needed money through equity financing, what would this mean to you from a personal investing standpoint?
Explanation / Answer
Debt dinancing
Debt financing has its limitations and drawbacks.
Equity Fianncing
Disdavantges of Equity Fianncing
From an persoal investor point of view
We should use
Couple of things
what is current debt level
Competive Intensity of insustry
You would be minority investor and hence would require that funds are utulized in right manner