AMtrak Case Study
The Amtrak was basically formed in the year of 1970 by the U. S. Congress in order for them to ensure that the rail service could remain an “integral part of the national transportation system.
” The Amtrak pretty much has become the main provider of every single passage rail services in the U. S. So as of the year of 2002 the Amtrak pretty much became completely self-sufficient to where it was no longer allowed to be used for federal subsidies to mainly cover their operation expenses.
Now in order o become self-sufficient to the Amtrak to which it has developed the high-speed rail service, to where it was Call, to which it is projected to basically bring in the revenues over $100 million a year. The Issue Due to the fact that the Amtrak reform and also the Accountability Act passed by the congress in the year of 1997 to where the corporation is now being forced to basically “eliminate its reliance towards the federal subsidies by the year of 2002. ” To Inhere it mainly poses a very serious and also a detrimental problem for the Amtrak to where they have never been profitable in the past 30 years since the company’s
Pretty much it has mainly caused them to be very creative and also develop the innovative to the profitable solutions. So the leading solution to their economic problems is to basically radical new business plan to where it will mainly focuses on the creation and also the development of the high-speed rail service. But n order tort them to launch this new service Amtrak pretty much needs to basically purchase the necessary equipment at the total cost of $750 million. Now the firm was able to secure almost half of this amount from the investors, but mainly the issue remains of how to finance the remaining of the $267. Lion that is pretty much needed.
Options Amtrak has basically two options to mainly fund their new Call line. #1 : They need to borrow money from the investors to pretty much fund the purchase. #2: They need to lease the needed equipment from the financial institution like the BUNNY. Rhea mainly have the offer from a bank to basically borrow money and also acquire more debt or very much likely they need to take out a leveraged financial lease with the BUNNY. So in this financial lease the Amtrak should mainly obtain the needed funds from the BUNNY and also make the semi-annual payments until the lease is paid off.