After careful consideration, it has been determined that the most effective approach for funding the purchase of MPIS is through debt. This decision was made based on several factors, including control, flexibility, income, and risk considerations.

By opting for debt financing, Winfield can maintain its current ownership structure and avoid diluting the ownership of its existing shareholders. This is particularly important for the Winfield family and senior management, who currently own 79% of the company’s common shares.

In terms of flexibility, taking on debt would provide Winfield with the necessary funds to complete the purchase while still allowing the company to pay out regular dividends to shareholders. Additionally, the debt can be gradually paid off over time, freeing up cash flow for other uses.

Another advantage of raising debt is that it would result in a lower cost of capital for Winfield. This is because the interest on the bonds would be tax deductible, resulting in an after-tax cost of just 4.225%. In contrast, issuing stock would have a cash cost of 6%. As a result, earnings per share (EPS) would increase from $1.83 to $2.51 with the debt issue.

Despite concerns about increased risk, issuing debt would not significantly alter Winfield’s risk profile. The company already has long-term commitments in the form of leases, and its consistent cash flows and long-term contracts with clients make it well-suited to take on additional debt.

Overall, it has been determined that issuing debt is the best option for financing the purchase of MPIS, taking into account the various control, flexibility, income, and risk considerations.