FNCE papern the balance sheet. The company lacks sufficient amount of cash to fund the investment so it needed to engage in debt financing to meet its goal. In the 2007 financial statements, HPL had
Net Working Capital of $102.5 Million so it has the capital means to pay off creditors, whichallows HPL to use debt financing.
Historically, HPL has been a very conservative company and refrained from using debt as a means to finance projects. The current Debt/Equity for HPL’s industry is 49.1%. If HPL used all debt to finance this investment, its Debt/Equity would be 18.7% (See Appendix B); if it used cash in conjunction with debt, the Debt/Equity would be 16.8%. In both cases, the Debt/Equity is closest to 17.6% which points to a WACC of 9.45%. If the firm undertook a more substantial amount of debt, the cost of the debt would not continue to be 7.75% so it is beneficial for HPL to keep its debt low. n the balance sheet. The company lacks sufficient amount of cash to fund the investment so it needed to engage in debt financing to meet its goal. In the 2007 financial statements, HPL had
Net Working Capital of $102.5 Million so it has the capital means to pay off creditors, whichallows HPL to use debt financing.
Historically, HPL has been a very conservative company and refrained from using debt as a means to finance projects. The current Debt/Equity for HPL’s industry is 49.1%. If HPL used all debt to finance this investment, its Debt/Equity would be 18.7% (See Appendix B); if it used cash in conjunction with debt, the Debt/Equity would be 16.8%. In both cases, the Debt/Equity is closest to 17.6% which points to a WACC of 9.45%. If the firm undertook a more substantial amount of debt, the cost of the debt would not continue to be 7.75% so it is beneficial for HPL to keep its debt low. n the balance sheet. The company lacks sufficient amount of cash to