Midwest Subcontracting, Inc.

In mid-1974, Mr. George Anderson, President of Midwest Subcontracting, Inc., was reviewing his major equipment acquisitions and their relative financing costs. Midwest Subcontracting is a medium-sized excavating and general contracting firm located in a major metropolitan city. | During the past year and a half, Midwest had been steadily replacing many of its heavy trucks, road graders, and other related heavy equipment. Simultaneously, interest rates had been steadily climbing in response to governmental efforts to control current inflationary trends. By June of 1974, prime interest rates had climbed to a new historical high of 11.5% (See Exhibit 1). Banks and other financial institutions normally required an additional 2% over prime when dealing with firms of Midwest's size and general type. | Midwest's Long-Term Debt for Equipment had grown to $389,000 by early June. Tills amount could be paid-off without penalty for $329,000 while replacement costs for this same equipment were estimated at $465,000. The market for used equipment had been appreciating rapidly in step with steadily rising prices for new equipment. A recent appraisal of Midwest's equipment estimated a current resale value of $379,000 for its financed portion.

Grantor dc:publisher

Creighton University

Year dc:date.issued

1974

Author dc:creator

• Upton, Thomas L.

Advisor dc:contributor.advisor

• No Advisor Listed

• Business--Case Study

Statement dc:rights

• A non-exclusive distribution right is granted to Creighton University and to ProQuest following the publishing model selected above.

Language dc:language.iso

en_US

Handle dc:identifier.uri

http://hdl.handle.net/10504/115703

OAI identifier oai:identifier

oai:cdr.creighton.edu:10504/115703