Debt Equity Mix Free Essay, Term Paper and Book Report
Debit Equity Mix
El Café is located in Nicollette Mall, Minneapolis, Minnesota. They cater to college students, yuppies even the occasional senior citizen with the many blends of mocha, java, and cappuccino.
In 1998 they started with a shoestring budget. Now, in 2001 El Café has shown to be a very profitable business and is thinking about expanding into a chain of coffee shops (University of Phoenix, n.d.)
First, we needed to decide how to raise funds and financing to open an additional seven-city expansion. Uncle Jorge is willing to invest in the business with the understanding that he be put in charge of key operations or have the opportunity to use the special promotions being offered by the state. For example, zero taxes and low interest loans for small businesses.
After strong consideration we have decided to go with 70% debt to 30% equity. When this is done we accomplished an 8.65% WACC. We have made the lowest possible WACC. Too high an equity component would have increased the WACC considerable given the high cost of equity. We also were worried that we would load E......
Word Count: 773
Page Count: 3 (250 words a page / double spaced)
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