Lester Electronics Financing Alternative Benchmark

Essay by jennymohonUniversity, Master'sA+, January 2008

download word file, 25 pages 4.0

Downloaded 286 times

Lester Electronics, Inc � PAGE �1�

Lester Electronics Financing Alternative Benchmark

Lester Electronics

Financing Alternative Benchmark

MBA 540 - Maximizing Shareholder Wealth

Lester Electronics Financing Alternative Benchmark


It has become a popular trend in corporate America to start, merge and/or acquire companies. This trend has become so popular due to the different models of business formations to choose from and the many choices companies or individuals have to finance the activities of the company. Businesses can choose to finance activities of the company by issuing debt and equity. This determines the capital structure of the company, which is very important once the business begins to run. Cash flow is also another important aspect of the business because it aids business managers in making decisions for the company. These are some of the important concepts related to the Lester Electronics scenario. Lester Electronics would like to acquire a Shang-Wa Electronics (Shang-Wa) because it would be beneficial to the company and the business they are currently doing with Shang-Wa brings in a good amount of revenue but Lester Electronics must evaluate its current situation and decide what is best for its company.

As in most situations, there are issues and opportunities that Lester Electronics will have to review in order to determine if the acquisition would be a good choice for the company. The shareholder's interest and the company's goals are also priority when making major decisions that may affect the company financially. A goal of every company is to maximize shareholder's wealth as well as the company's revenues.

Determine the Weighted Average Cost of Capital

The weighted-average cost of capital (WACC) is a formula that helps a company to find out how much the company is spending on interest on all its financing activities such as stockholder's equity both common...