Debt Policy at Ust Inc.

UST dividend payment ability can be hampered given the following risk factors: anti-trust dispute is resolved in favor of competitors and UST is subject to further penalty, corporate restructuring or new entrants are encouraged to enter the moist smokeless market; management’s continued lackluster non-core investment performance further harms the company’s return over investment; Price value further prey market share of premium products while premium R&D is not catching up with the pace.

This is no surprise due to the major expansion that CC took on in 2001. Lastly, the long term debt to capitalization ratio slowly decreases which is just showing how CC is not being risky with their capital through debt.

6. If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends?

The company was recently presented an opportunity by its largest retail customer to significantly increase its share in their private label manufacturing. The prospect of growth was risky, since it

9. What is the Cost of Debt, before and after taxes? Using the interest rate for the largest debt…cannot use the weighted interest rate for the debt since it includes capital lease obligations with no stated rate and could not find in the notes to the financials. 5.4% After tax cost is .054 x (1-.36) = 3.5%

1. Their uses of cash were primarily used for paying off debt and investing it in marketable securities. Also they spent some of their cash on fixed assets. Even though their ending cash was lower than the previous year, they were using their cash effectively.

Shareholder’s equity would be lower than that shown in 1982 ($318,000) because the company has to pay off interest and principal for many loans. There will be little money left for shareholder’s equity.

This case discusses Philip Morris Inc. intentions to acquire the Seven-up Company in an effort to diversify their consumer goods. The decision has already been made, however they must decide on an offer price to buy out the company. This report will discuss PM’s acquisition strategy and its appropriateness, along with whether or not 7up fits the criteria of PM’s strategy. The report will further discuss the methods used to determine the maximum amount that Philip Morris should pay for 7up, while also going into detail about the minimum price 7up should accept as a buyout.

This aggressive spending minimizes the company’s cash on hand and indicates that while AMT is generating cash, their cash outflows are greater than their cash inflows. Mr. Haskin’s belief for the future growth potential of AMT is indicative of the fact that spending of R&D was necessary. But it may be that the excessive spending is why AMT reports negative earnings (shown below) from -9.8% in 83’ to -43.8% in 85’, resulting in inefficient use of its cash.

The company’s debt ratios are 54.5% in 1988, 58.69% in 1989, 62.7% in 1990, and 67.37% in 1991. What this means is that the company is increasing its financial risk by taking on more leverage. The company has been taking an extensive amount of purchasing over the past couple of years, which could be the reason as to why net income has not grown much beyond several thousands of dollars. One could argue that the company is trying to expand its inventory to help accumulate future sales. But another problem is that the company’s

Next is Asset turnover with .55 times which is a measure of the efficiency of asset utilization. Finally the equity multiplier with 2.26 which is a measure of financial leverage of the firm. When compared to the traditional ratios we get similar results; Profit margin 25.44% (27% DuPont) versus 18.75% industry average. Asset turnover is .54 (.55 DuPont) versus .50 industry average. Equity multiplier 2.28 times (2.26 times DuPont) versus 2 times industry average. The results show that the DuPont analysis using ROE as the main determinant are very similar to the regular ratios. Furthermore the ROE of the traditional ratio is 31.32% with DuPont being 33.10% versus the industry average of 18.75% shows that the firms ROE is very robust. While the firm has some challenges with respect to liquidity and inventory management, as well as debt management it still is doing a good job with respect to its shareholders. However it could be doing a little better for the stockholders, and needs to address some of the above issues mentioned.

Considering UST only had short-term debt issues prior to the recapitalization, and that credit ratings depend on maturity of debt issued, we cannot simply rely on the commercial paper ratings to extrapolate. We assume that rating will be A based on competitors’ ratings as well as UST’s overall financial standing. We then use this assumption to calculate the value of the company using the two methods above.

After all of this we also need to keep in mind the financing deals that they have made with the Patricorp Group of $312,500 In for 41% of the equity, and $625,000 in subordinate debt. That was the previous debt that I talked about in the previous paragraph. As of the current revenues of the company, and considering the actual payments needed to pay they need to continue to grow the company to keep up and service the debt they will inquire. It is critical that they are successful with the growth, so that they do not fault on their agreement and have to give up more equity in the company so that they can retain ownership.

In this report we will identify business risk that AT&T experienced due to their divestiture in 1982. We will conduct our analysis based on financial concepts, and finally recommend necessary actions that should have been conducted when the company formulated its financial policy in 1983.

and the sale of noncore assets were common. Moreover, in anticipation of sluggish sales in the