Key Issue: Is $1b appropriate to enhance UST’s firm value and ultimately shareholder value?
Higher leverage is very likely to create value for a firm considering capital structure change by exerting financial discipline and more efficient corporate strategy changes.
Before evaluating whether $1b is value enhancing in quantitative measure, ability to cope with pre-requisite interest payment and potentially dividend payment (possibly dividend growth maintenance) should be considered.
Required debt rate and pro forma income statement
Risk determinants
Credit rating agencies take a wide range of factors – debt raising purpose, industry outlook, corporate profile and financial measures into account when performing corporate bond
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Pro-forma income statement and interest payment ability
Pro-forma income statement to illustrate interest and dividend payment ability is based on various assumptions as shown in Exhibit 1. Expected cases are the measures used in the following discussion. Conservatism is adopted throughout the assumptions especially sales growth rate, credit rating and Medicaid penalty assumptions.
Pro-forma income statement and key credit rating determinants are shown in Exhibit 2 and 3 respectively. Remaining share no. of 158.3m after repurchase is based on proportional value addition distribution between cash-out and remaining shareholders and this number is inserted to calculate earning per share and corresponding immediate share price change after announcement of repurchase program. According to Exhibit 3 and industrial average of relevant grades, only fund flow/ total debt and total debt/ capital measures are not comparable with A credit rating. Considering EBIT and EBITDA interest coverage are two most important criteria and equity market value is so substantially different from book value which leads to a healthy
The following information is provided for adjustments prior to closing the books. Lopez and Knepp ask you to enter the adjustments into the spreadsheet, in the two columns to the right of the unadjusted trial balance. (CM2 uses a perpetual inventory system.)
Sparkle Company is a Nigerian diamond mining company. Sparkle is a joint venture, 50 percent owned by Shine and 50 percent owned by Brighten. Both Shine and Brighten are U.S.-based companies with their functional currency being the American dollar. Sparkle Companies functional currency is that of Nigeria, being the Naira. During 2009, Sparkle had several transactions with its joint venture owners and outside parties. The details of Sparkle’s transactions are three loans, three expenditures, and one revenue stream. The loans the company took out were $1 million from Brighten, $1 million from Shine, and 300 million Naira from a local Nigerian bank. The expenditures
The applicants are morally correct as long as their action promotes their long term interest. If their action produces or will produce for them a greater outcome of good, versus evil in the long hall than any other alternative, than that action is the right one to act on, and the individual should take that to be a moral act. An Assessment of Morality by Ethicsinbusiness.net
1. Detailed Explanation: People should recycle their paper and plastics instead of burning or sending trash to the dump. Burning trash made of certain plastics and chemicals can cause toxic smoke and air pollution. Also, just throwing away your waste only adds to our Earth’s litter and land and water pollution problems.
Leverage can increase a firm’s expected earnings per share. An argument is that by doing so, leverage should also increase the firm’s stock price. Because BBBY
IgG – funtions in neutralizing, opsonation, compliment activation, antibody dependent cell-mediated cytocity, neonatal immunity, and feedback inhibition of B-cells and found in the blood.
As mentioned in the introduction of the mini case, Hobby Horse Company, Inc. (HH) experienced a tough year in 2011. HH opened up a number of new stores but experienced a poor Christmas season. Christmas season is the biggest sale period for retail stores. As a result, bad Christmas sales performance played a big part of HH’s loss for year 2011. As we computed the financial ratios for HH, we can see the effects from new stores openings and poor sales performance.
Read Rush Johnson Farms Inc. v. Missouri Farms Association, 555 S.W.2d 61 and post a draft case study to the discussion board. Identify the Facts, Issue, Holding, Reasoning and Disposition. Case study #1 will be due week 3. This exercise will help you work through the reading a case prior to receiving a grade. Use the LEXIS NEXIS database through the Webster library to access the case.
Aside from the two aforementioned proposals the company can raise its leverage in other ways. By conducting DuPont analysis and understanding operating leverage we see that purchasing fixed assets and decreasing stockholder’s equity will raise the equity multiplier and the firm’s operating leverage. In this instance we recommend against this approach as the firm already has a large amount of excess cash above what they require to fund new positive NPV projects and purchase new assets. Investors would rather see their capital returned to them in the form of share repurchases and dividends as it is evident by the company’s cash stockpile that they can
An increase in leverage is not for all companies. All companies are different from one another, which mean that they will have different levels of debt coming from different markets, different industry and different level of stages. For example, a moderately non-cyclical industry like Seal Air Corporation is more ideal for a leverage than another industry is attributable to a history of steady and predictable cash flows that do not require large ongoing capital
Suppose you are the network manager for Central University, a medium-size university with 13,000 students. The university has 10 separate colleges (e.g., business, arts, journalism), 3 of which are relatively large (300 faculty and staff members, 2,000 students, and 3 buildings) and 7 of which are relatively small (200 faculty and staff, 1,000 students, and 1 building). In addition, there are another 2,000 staff members who work in various administration departments (e.g., library, maintenance, and finance) spread over another 10 buildings. There are 4 residence halls that house a total of 2,000 students. Suppose the university has the 128.100.xxx.xxx address
Build the management-research question hierarchy, through the investigative questions stage. Then compare your list with the measurement questions asked.
This loan should not have been approved by a level 2 lender. Paul Stephan is signed on 7 loans with Utah First for a total loan amount of $253,949.00, between his 2 business accounts and his 2 son’s auto loans as co-maker. A level 2 lender should not approve if the member owes more than 100K to UFCU.
Young Professional magazine was developed for a target audience of recent college graduates who are in their first 10 years in a business/professional career. In its two years of publication the magazine has been fairly successful. Now the publisher is interested in expanding the magazine’s advertising base. Potential advertisers continually ask about the demographics and interests of subscribers to Young Professional. To collect this information the magazine has commissioned a survey to develop a profile of its subscribers. The survey results will be used to help the magazine choose articles of interest and provide advertisers with a profile of subscribers. As a new employee of the magazine, you have been
One of the main challenges businesses face when trying to grow is how to raise the necessary working capital to achieve the necessary growth, whether for additional employees, inventory or plant expansion, technology upgrades or other. The big decision then becomes whether to raise the working capital in the form of debt or equity.