Each team should prepare a written report (2 to 3 pages) on this case. Please ensure you answer the following questions in your report. Note that question 1 requires you to do a financial projection of Alliance Concrete’s 2006 financial statements (using Excel). One team will be selected at random to lead the class discussion on the case and present their 2006 financial projections. 1. What is your best estimate of the 2006 financial statements? As a starting point, assume that Alliance makes the expected $3 million dividend payment to National. Hence, the balance sheet will be balanced by adjusting the amount of the bank loan. This implies a possible renegotiation with the bank. Once the forecast is completed, consider the effects on the borrowing amount from changing the dividend or capital expenditure choices. (See attached excel files with the 2 scenarios (pessimistic and most likely). In both me need a loan from the bank to meet all commitments of the company, dividends, CAPEX and Bank Debt) 2. Alliance must choose between
a. making the principal repayment to the bank,
b. making capital investments, and
c. making the dividend payment to National.
What is your recommendation, and what is your justification?
b. making capital investments so that the firm can survive in the market. Otherwise it is impossible to achieve the revenues and to continue its operations.
3. Assume you chose to renegotiate with the bank – how would you approach the bank, and what arguments would you put forward? Now that the company will be in a better shape next year,
Taking in consideration the most likely scenario, we recommend renegotiating with the bank to get a new loan based on the reduction of the Debt as a percentage of Revenue Ratio in a crisis environment, which is a good achievement of the management team of the firm. Ratio| 2002| 2003| 2004| 2005| Forecast|
Debt as a % of...