Kettle Mountain Mining Company Case Study Example | Topics and Well Written Essays - 750 words

Kettle Mountain Mining Company - Case subscribe ExampleTo be exact, as per the investment analysis, the railway project is estimated to cost (80,000,000 + 25,000,000 + 1,000,000) = 106,000,000. However, if the Federal Government accepts the familys petition for premium, the share of the project cost to the Kettle mining company would be (106,000,000*0.5) = $ 53,000,000. The subsidy would help reduce the burden of the project for the company. Therefore, Dr. Rousseau should consider going public to raise the amount necessitate for investment. Secondly, if, as is recommended, the Kettle mining Company decides to go public, the companys capital structure moldiness change to reflect the debt borrowed from the public through the issuance of an initial offering. In that case, Dr. Rousseau, who seems to oppose the IPO option must make sacrifices and relinquish a portion of the companys control to the new shareholders. The IPO is the outperform option since it provides a long-term sourc e of funds, which is appropriate for investments such as railroad development. It is also eventful to consider the fact that a loan from a bank has been negotiated at a cost of 11%. This source of finance will increase the companys weighted cost of capital to 5.8%. Comparatively, the IPO option is better than the loan option for the reason that the loan restricts the companys decision-making and must be called back on maturity, while the IPO can only be called back when the company goes beneath receivership (CMA Canada, n.d, p. 1-3).Third, currently, the company heavily relies on road and air transportation media. The cost of the road transportation during pass totals to $ 2 million and that of air transportation during the spring and summer totals to $ 3.5 million. If the project is undertaken, these costs will be avoided. In addition, the train is expected to provide transport and freight services to residents of Carlsbad and Whitehorse, which is expected to generate revenues.