Presented By:

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Amena Khatun Liza (ID # 112 111 008) Jahangir Alam (ID # 112 111 086) Abu Fazal Md. Sajazur Rahman (ID # 112 111 002) Hasan Md. Tahidur Rahman(ID # 112 111 075)

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Operating since 1993 Owned by Pablo Este Engaged in steel production In April 1993, Pablo Este and colleagues are willing to buy the assets of the plant $ 14 million and equivalent to 250,000 equity. The company began operating under the name "Rosario Acero S.A." in July 1993.

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Rosario Acero S.A. companies produce six products Rolling-mill rolls steel castings staves mill liners continuous caster rolls and miscellaneous products.

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In 1997, the economic condition of the country is on the upswing with projected growth rates Inflation between 2.5 to 4 percent GNP growth between 1.5 to 6 percent

In 1996 the Argentina steel industry enjoyed a moderately profitable year. Industry reach 80 percent capacity in 1996

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The company needed $ 7.5 million Determine which one is more optimal Issue long term debt in the form of bonds (notes + warrants) Or issue long term equity through the company's first initial public offering IPO)

EPS analysis at different level of Debt and Equity mix Finding Debt and Equity performance measuring analysis by considerations of Flexibility, Risk, Control and Timing of Debt and Equity.

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Flexibility of Debt and Equity Risk of Debt and Equity Control of Debt and Equity Timing of Debt and Equity

Too many long-term debt can affect the balance sheet so that the financial statements are not good. This can limit the financial flexibility if the company needs more funds

Financed with Debt

Earnings per Share $7,57 $4,96 $6,04 $7,29 $8,70 $10,28 $12,06

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The risk of debt - the default Default ---> Bankruptcy External risks (inflation and interest rates) Interest rates go down-not good Fixed coupon of 13%

There is no problem in the controls on financing in the form of debt So, good decision making power

If interest rates go up, then the fixed rate financing at 13% is a good decision Conversely, if interest rates fall, then this decision could be a blunder for the company

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Increase borrowing power firm Greater flexibility has to be weighed against the Greater EPS

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No guarantee That the shares of the stock would trade at an acceptable level Rosario can pass the risk on to an underwriter In order to rise the amount Desired, the size would have to be very large result ---- loss of control due to dilution

A firm loses control as it increases its amount in equity The shareholders gain control of the company in terms of decision making power

The economy turning around, the stock price would increase of Rosario Will Likely most receive more than his share asking price as the increase of stock prices

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The debt financing seems a better option for Rosario Debt financing higher EPS Will Produce

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Management would not give up any control of the firm The risk associated with debt is less than equity
Although income would be negatively affected in the last year due to debt principal payments, but firms can generate enough income in Earlier year to cover it.