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Issuing additional debt to finance the company expansion would worsen the company’s debt ratio as it is already more than average. The company envisions to be profitable by raising capital from existing stockholders by issuing common stock through rights offering.

Convertible debts are long-term securities which can be converted into issuer 's stock options at a specified conversion ratio, if the debt-holder wants to exercise them. Convertibles include bonds and preferred shares, but most commonly take the form of bonds. Convertible bonds are a type of compound financial instrument with characteristics of both liability and equity.

o Cost of debt in this case is 12.5% though MCI can raise $ 100 million more with this option in comparison to option (a) above. Servicing this debt would be a significant drain on the cash flow. o Please see Exhibit 3. (c) $600 million Convertible offering @ 7.625% 20 year with conversion at 54 per share o Using this option MCI can raise $ 100 million more than option (b) at 4.88% lower rate of interest. It also gives MCI an option to convert it to equity once the stock price reaches 54 (it is currently 47). Based on previous convertible offerings (As per exhibit 6 of case, 1978, 1979, 1980, 1981 and 1982), MCI has been converting it to equity within 18 months because of its high growth. As higher growth is projected for the next few years (Exhibit 9 of case), MCI is expected to convert this $600 million offering to equity, thereby reducing its leverage. o This option allows to finance its current activities and match capital inflows with expected investment outlays in the near future. It also allows MCI the option to eliminate the cash flow drain from servicing the debt once the stock price increases. o As per Exhibit 3 attached here, this offering will provide capital to meet the external financing needs for 1983.

2. Compare and contrast the nature of cash flows stemming from an investment in stock with those coming from bonds.

Compensation systems can take on many forms, all of which have positives and negatives related to it. However, certain components are noted to be determinants of solid compensation plans. One agreement of a solid compensation system is the use of incentives. “Clearly a successful companies set objectives that will provide incentives to increase profitability” (Needles & Powers, 2011). Incentive bonuses should be measures that the company finds important to long-term growth. According to Needles & Powers (2011) the most successful companies long term focused on profitability measures. For large for-profit firms, compensation programs should offer stock options. The interweaving between the market value of a company’s stock and company’s performance both motivate and increase compensation to employees As the market value of the stock goes up, the difference between the option price and the market price grows, which increases the amount of compensation” (Needles & Powers, 2011). Conclusively, a compensation plan should serve all stakeholders, be simple, group employees properly, reflect company culture and values, and be flexible (Davis & Hardy, 1999; The Basics of a Compensation Program).

The employer does not offer minimum essential coverage to at least 95% of its full-time employees. The shared responsibility payment will be $2000 per full-time employee less the first 30. Payment will be due on all employees, even if they accepted minimum essential

An employer mandate that demand company with fifty or more employees to offer coverage or pay fine,

Base pay, protection programs, paid time-off programs, and work-related bonuses are all part of which type of compensation program?

In order to satisfy the matching or nonelective contributions requirement employers must either meet the matching contribution requirement or make a nonelective contribution to a defined contribution plan of at least three percent of an employee’s compensation on behalf of each nonhighly compensated employee who is eligible to participate in the automatic enrollment plan. A plan normally satisfies the matching contribution requirement if the employer makes a matching contribution on behalf of each nonhighly compensated employee that is equal to 100 percent of the employee’s elective deferrals as do not exceed one percent of compensation and 50 percent of the employee’s elective deferrals as exceeds one percent but does not exceed six percent

A statement from the officer of the corporation demonstrating that he is willing and able to forgo his compensation for the years in question; and

* The vendor can reasonably estimate the fair value of the benefit identified under the preceding condition. If the amount of consideration paid by the vendor exceeds the estimated fair value of the benefit received, that excess amount shall be characterized as a reduction of revenue when recognized in the vendor’s income statement.

Dunlap’s salary was just over $500k and he took no bonus. But he received a substantial stock option and award package. The restricted stock award component was to vest in two years, meaning that Dunlap’s compensation would be closely linked to the company’s stock performance for that time. Although the short term profits benefited shareholders, no incentives to create a long term, profitable company existed. Sunbeam’s performance-based incentives brought greater motivation to Dunlap to increase the firm’s stock value by any means necessary. He created remarkable shareholder value, in part by cutting half the company's 12,000 workers and closing many plants. Generally speaking, the first compensation package was excessive, but it linked the CEO’s and stockholders’ goals. It was not well designed, but it was congruent with Sunbeam’s business model of maximizing shareholder profits, but it drove an unhealthy behavior.

Murray Compensation, Inc. (Murray), an SEC registrant that provides payroll processing and benefit administration services to other companies, granted 100,000 “at-the-money” employee share options on January 1, 2006. The awards have a grant-date fair value of $6, vest at the end of the third year of service (cliff-vesting), and have an exercise price of $21.

Though bonds provide such safety, their yields are very low and have little potential for capital appreciation in the long-run for both the issuer and receiver. Besides, the low interest-rate of bonds makes the return on holding cash virtually non-existent (Voya & Scotia, 2009). Convertible bonds, however, offer a middle ground between the safety of bonds and the upside potential, and risk, of stocks. For this firm seeking income, higher-yielding convertibles bonds are the right options they can explore. This allows for the downside protection of a

the accrual basis of accounting). Under EAS, profit sharing to employees and board of directors is recognized as a dividend