This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
A proposal of more complexity came from a southern state in which it was planned to build a railroad of less than 30 miles through three prosperous villages and opening up a rich agricultural and lumber country to Port "D" and the sea. Some information was furnished by the intending promoter of this project, but the data as at first submitted was so incomplete that it was necessary to draw up a list of definite questions, which are given below, with a view to securing such information as would be at once required by a banker or bond dealer if he were to look into the proposition at all.
1. How much traffic is now hauled by existing transportation agencies in this region?
2. How much standing lumber will be made available for shipment by this new road?
3. What are the important markets for this lumber?
4. At what price can it probably be sold in these markets?
5. What, approximately, will be the cost of cutting and of hauling lumber to railroad and loading on cars? (Answers to the above questions will give a basis for figuring the possible rates on lumber from the point of loading to the markets).
6. Just how much rail and water traffic through "D" is in sight?
7. What advantages as a port for rail and water traffic will Port "D" have over competing ports?
8. What inducements can be offered which will lead to the diversion of traffic now moving through competing ports to the route through Port "D"?
9. At what rates does traffic now move through competing ports to and from the markets which the promoter hopes to reach by his proposed route? 10. What is the attitude of connecting rail and water lines? Will they be inclined to assist in the development of Port "D" or will they find it to their interest rather to discourage the growth of this port? (This is, perhaps, the most important question of all, for a short railroad, such as the promoter has in view, could scarcely exist, let alone thrive, unless it has the cordial co-operation of connecting lines).
11. Assuming that connecting lines are friendly, what rate per ton-mile can the proposed railroad probably secure on the through traffic?
12. What will be the exact cost of securing the right of way and constructing the proposed road?
13. What will be the cost of providing docks and other terminal facilities at Port "D"?
14. Do the above estimates contemplate providing a well-built, modern road, or rather a temporary construction which will have to be replaced later?
15. What will be the cost of equipment and of necessary supplies of all kinds?
16. Will it be possible to secure local subsidies, or other assistance?
17. Does the promoter have banking connections on which he can rely for assistance in floating the securities of the proposed road?
18. Does the promoter know any capitalists who will probably be willing - provided satisfactory answers to all the above questions are given - to buy the stock issues of the proposed road?
19. Is the promoter able and willing to incur the large expense that will be necessary to secure correct, dependable answers to all the above questions?
The process of securing answers to the questions above listed would in each case probably bring to light many additional questions requiring investigation. Just what these questions may be could not very well be determined in advance, inasmuch as they would result in part from the local conditions under which the project is to be established. By working out a list of questions in their logical sequence and by getting the most complete and trustworthy answers possible, the promoter may be certain that he is leaving nothing of great importance uncovered. To be sure, there may be unfortunate slips and omissions even in the most thorough investigations, but they will generally be found to be due to peculiarities of the business or of the locality in which it is carried on which escape the eyes of a stranger. For this reason it is always very desirable that the investigator should associate himself as closely as possible with a man who is thoroughly familiar, by long experience, with the peculiarities of the project.