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Rocky Mountain High Ski Resort Inc RMH Case Solution

Solution Id Length Case Author Case Publisher
1799 265 Words (2 Pages) David C. Shaw, Blair Zilkey Ivey Publishing
This solution includes: A Word File A Word File and An Excel File An Excel File

VP finance of RMH Skiing identified four options for phase 2 financing, namely bank debt, pension fund private placement, issuing ordinary shares, and issuing preference shares. After calculations of the net present value of the four options, it is concluded that going public with Preference Shares is the best option, as it has the highest NPV among the four options (see Excel file).


Case Analysis for Rocky Mountain High Ski Resort Inc RMH

Other than NPV, issuing preference shares is a good option because it would not increase the debt exposure of the company. As previously the company has obtained debt financing, taking on more debt could increase its leverage. Moreover, issuing preference shares would also not shift the ownership of the company from existing owners to new shareholders, and would allow the company to get rid of the preference share investment within 7 years.

If the Company would have chosen the debt options, it would have increased its debt to assets ratio, thereby making the company more leveraged. Further, their NPVs are also lower than the other options.

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