Case ID: 4271
Solution ID: 18944
Words: 1396
Price $ 75

Harmonic Hearing Co Case Solution

Case Solution

Harmonic is a little, privately held producer of portable hearing assistants. Harriet Burns and Marc Davis, two representatives at Harmonic, have a chance to buy the organization from the organizer. Also educated insiders who comprehend the business, Burns and Davis trust the advantages of possession far exceed the dangers. While the choice to buy Harmonic is simple for them, masterminding financing demonstrates more troublesome. The organization is get ready to dispatch another portable amplifier item and Burns and Davis need the financing bundle to incorporate the extra capital needed to finish both the advancement and the dispatch. Two financing choices are introduced: one is for all intents and purposes all obligation financed, the other all value. The financing structure Burns and Davis select will have a critical effect on the items and future prospects of the organization. Students must break down the two financing options, focus the focal points and disservices, and suggest the best choice.

Excel Calculations

Debt Financing

Profit and Loss Statement ( Debt Financing) 2010 to 2017

Balance Sheet ( Debt Financing) 2010 to 2017

Free Case Slows  ( Debt Financing) 2010 to 2017

Terminal Value (Fourteen times Net Income of 7th year)

Cash Payment Made By the Company

Forcasted Cash Flow for Burns and Irvine ( Debt Financing) 2011 to 2017

Equity Financing

Profit and Loss Statement ( Equity Financing) 2010 to 2017

Balance Sheet ( Equity Financing) 2010 to 2017

Free Caseh Flows ( Equity Financing) 2010 to 2017

Terminal Value

Forcasted Cash Flow for Burns and Irvine  ( Debt Financing) 2011 to 2017

Questions Covered

1. For both financing alternatives, how large are the forecasted revenues, expenses, profits, and free cash flows generated by Harmonic in years one through seven?  What is the terminal value of the company under each scenario?  What cash payments will be made by the company at the end of year seven, and how large are these payments?

2. At what price must Harmonic repurchase the building and land from Frank Thomas to produce his required 15% after-tax return?

3. What proportion of the terminal value must be distributed to Comet Capital to produce its required 27% before-tax rate of return?

4. What are the forecasted cash flows, rates of return on investment, and value created for Burns and Irvine under the debt and equity financing alternatives?

5. What are the positives and negatives of each proposal?  Which financing alternative would you recommend, and why?