Wave Dynamics

WAVE DYNAMICS, INC.

A CASE ANALYSIS

THE COMPANY

What does the company want to do? What are some industry /

environmental factors to consider?

THE PROBLEM

Ultimately, what are we trying to solve?

THE FINDINGS

What do the numbers show?

RECOMMENDATIONS

What do we propose?

NEXT STEPS

Where do we go from here?

2

Rapid demand growth calls for the Tampa expansion.

electronic test &

measurement

equipment

Main product line:

GENERATORS

Tampa Expansion

•

•

•

3

80,000 square foot

facility

Total cost of $6

million

Sweep and signal

generators; test

equipment for CATV

industry

WDI has several current financing arrangements.

Bank Lines of Credit

•

Lines of credit total $10 million

Short term interest rates @ 1.1 x prime rate

•

10% compensating balance; 10% on average outstanding $4M

•

Long-Term Debt

•

•

Total of 2M mortgage Notes Payable @ 9%

1.5M @ 7.5%

Internal Funds

•

Retained earnings - appropriated!

4

WDI has several current financing arrangements.

Bank Lines of Credit

•

•

•

Lines of credit total $10 million

Short term interest rates @ 1.1 x prime rate

10% compensating balance on $4M

Long-Term Debt

•

•

Total of 2M mortgage Notes Payable @ 9%

1.5M @ 7.5%

Internal Funds

•

Retained earnings - appropriated!

5

WDI has several current financing arrangements.

Bank Lines of Credit

•

•

•

Lines of credit total $10 million

Short term interest rates @ 1.1 x prime rate

10% compensating balance on $4M

Long-Term Debt

•

•

Total of 2M mortgage Notes Payable @ 9%

1.5M @ 7.5%

Internal Funds

•

Retained earnings - appropriated!

6

PROBLEM STATEMENT & FRAMEWORK

“How should WDI finance the

construction of the facility in Tampa?”

optimal financing option

minimize cost of capital

maximize stakeholders’

wealth

7

short-term construction

loan

private borrowing from

an insurance company

common stock issue...