Grand Metropolitan Plc Essay

1100 Words 5 Pages
The issue:
Grand Metropolitan PLC is the world’s largest wine and spirits seller. It mainly operated in London, USA. In 1991, it beats market expectation with a 4.8% increase in pretax profits, and the company Chairman stated that company’s goal “to constantly improve on”. Despite the great performance in the world recession in 1991, the price of GrandMet shares was 10% below the average price/earnings ratio of the companies in the Standard & Poor’s 500 index. And more important, rumors had that GrandMet, valued at more than $14 billion in the stock market, maybe a takeover target. The management dilemma is to understand why the company’s stock is traded below of what considered being the right price and whether the company is truly
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From the above calculations, we find the total L/T debt + Preferred Stock Outstanding (in both US and Britain) = Vd = £5361.10M
Thus the WAVG Cost of Debt (including L/T debt and preferred stock) = rd = 8.633%

Using a tax rate of 35%, Vd =

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