Friendly Cards, Inc.
The company is a relatively small, fast-growing, profitable, and highly-levered manufacturer facing a juncture of several
critical decisions. Friendly must decide on the purchase of a new piece of capital equipment; whether to acquire another company;
and, whether to issue common stock to raise funding and reduce financial pressure. The interaction between corporate investment
and financing decisions.
To gain practice in the standard tools of financial analysis, including pro forma projections and financial ratios, funds
requirements, and debt covenants. To review the valuation of both a piece of equipment and an entire company; practice the
derivation of weighted average cost of capital and estimate free cash flows. To review financial policy and financial execution,
including issues of target capital structure, financial flexibility, costs of financial distress, and various approaches for
As Ms. McConville, prepare recommendations for Ms. Beaumont, to include:
1. Should Friendly Cards purchase the envelope machine? If so, how?
2. Should Friendly Cards acquire Creative Designs?
3. Should Friendly Cards accept the offer of the West Coast investors and issue new equity?