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Continental Carriers, Inc.
(This is not an essay. Continental Carriers, Inc. responds to each of
the comments raised by the five members of the board.)
Continental Carriers, Inc. (CCI) should take on the long-term debt to
finance the acquisition of Midland Freight, Inc. for a few reasons.
The company is heavy on assets, the debt ratio will only grow to 0.40
with the added $50M in debt. Also, the firm will benefit from an
added $2M in a tax shield and be able to return $12.7M a year to its
stockholders and investors, instead of $8.9M if equity is raised to
finance the acquisition. Lastly, the stock price and earnings per
share will increase to $3.87 in comparison to an equity-financed
acquisition of $2.72 per share. CCI would be taking a somewhat high
risk by issuing additional stock due to the uncertainty about the
offering price. Having a low P/E ratio with respect to the rest of
the market, and the replacement cost of the firm being greater than
its......

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Approximate Word Count: 924
Approximate Pages: 4 (250 words per double-spaced page)

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