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Competition Bikes. Inc.
Canadian Expansion Summary Report
This report is designed to provide an overview, analysis and summary on the viability of either merging or acquiring the Canadian Biking Inc. facility. The Canadian market is growing and may be a substantial opportunity for Competition Bikes, Inc. This report will provide a “summary” of the following:
· Capital structure options
· Capital structure justification
· Capital budget areas of concern
· Working capital for expansion
· Expansion options – merge or acquire
As previously reported the Canadian orders for Competition Bikes, Inc. comprise 10% of the company’s business. The Canadian market is continuing to grow and market research indicates a sufficient number of high end bicycle shops would carry the CarbonLite product. Obviously a number of factors need to be considered before making this decision, such as, qualified labor force and cost of labor, tax incentives, transportation cost new facility cost and acceptance of the community. However, a new option became available after Canadian Bikes, Inc. heard about Competition Bikes, Inc. desire to move into the Canadian market. Canadian Bikes, Inc. proposed a number of options to Competition Bikes, Inc. · merger with Canadian Bikes, Inc.; · acquisition with Canadian Bikes, Inc. for $1.485/share; · Licensing of the Titanium technology for $200/unit.
Based on this proposal the merger or acquisition of Canadian Bikes, Inc. required a detailed review and recommendation of the options provided.
Capital Structure Options
“The two principal sources of finance for a company are equity and debt. What should be the proportion of equity and debt in the capital structure of the firm?” (ManageMentor, 2003). A number of various theories may be utilized to make a determination. These theories are known as the net income theory (NI), the net

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