Rjr Nabisco

Our company will plan to finance our strategy principally through issuing stock and cash flows from operating activities generated from the company’s normal business functions. It is undesirable for our strategy to issue debt because we would like to stay away from interest payments. Our company anticipates our debt to equity leverage ratio to be around 0.5.

All of the cash flows are discounted back to the year of 2002 in the calculation of NPV value. With the annual cost savings of $80 from 2003 to 2007 and the integration cost of total $130, Timken’s new NPV is calculated to be -$970.42.

3. Compute the unlevered free cash flow and the interest tax shields from 2008 to 2012 based on estimates provided in Exhibit 1 and Exhibit 6. (3 points)

In order to arrive at the non-operating cash flows in year 10, we must add together the net cash flows from investing and financing activities.  The non-operating cash flow when the project is terminated in year 10 is $902,000.

* Taxation and salvage: Tax regulation in every country is different, so the company should consider it when calculating NPV. Also, it should clarify the depreciation expense and interest expense to

In addition, as we are comparing the profit margin and operating profit margin, we notice that interest expense, from 2006 to 2010, consumed a relative small portion of sales proceeds comparing to 2011. In 2011, the profit margin for HH is -1.46% and the operating profit margin for HH is -0.74%. Since profit margin includes interest expense in the calculation while operating profit margin does not, we can conclude that HH has about the same amount in interest expense as the amount of operating loss before interest. This finally doubles the amount of company’s loss at the end of the cycle. This big amount of interest expense leads us to study HH’s leverage ratios.

This case is about the slotting allowance when Allied Old English Company wants to introduce the Sorrell Ridge spreadable fruit product into the California market. Considering the factors including product itself, market, distribution channels, consumers’ needs& demand, competitor’s profiles, we analyzed the negotiating power and weakness of Sorrel Ridge and Bromar.

Commercial’s NPV is $.1516 million (see Table 3). This was determined by using the present values of the four year lease agreement between Prudent and Commercial. We concluded that Commercial’s discount rate will be 10% because of their opportunity cost. Commercial needs to have a residual value on the DAS of 6.8 million or greater, which will give them a positive net present value. Therefore, if their net present value shows negative, they would not want to lease to us. Assuming Commercial receives the same 5 year MACRS rate on the equipment purchase, then the system should be worth 7.01 million (book value) at the end of year 4 (see Table 4). This allows Commercial to have a positive NPV of $.1516 million (see Table 4). Therefore, they would be willing to lease the DAS to us.

It is important for stockholders to continuously re-evaluate their investments. Although some investors do this more frequently and thoroughly than others, the majority of shareholders do so at least once each year. Therefore, Torres’ desire to update her analysis in order to determine whether Costco was still operating efficiently makes perfect sense. After thorough examination, my analysis proves that Costco remains one of the industry’s leading competitors and there seems to be no reason for Torres to sell her shares as long as she wishes to retain holdings of a

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 analysis of a repurchase of stock for $400 million cash, and recapitalization to 80% debt-to-total capital by borrowing $1.27 million reveals that BBBYs return on equity will be 113%, return on assets 61% and an after tax cost of debt of 28%. ROE is > ROA and ROA > after tax cost of debt. With the 80% debt-to-total capital structure ROE exceeds the other two capital structure scenarios of no debt and 40% debt-to-total capital. While all of this looks great there are other considerations. The household and personal products industries debt to total asset ratio is 34.69% while BBBY debt to total asset ratio is at 44% ($1,270,000/$2,865,023). Increasing to this capital structure would also reduce shareholders earnings per share.

Constructing Free Cash Flows allows the calculation for NPV, which enables an even comparison of inflows and outflows of the competing projects. EBITDA does not take into account the Income Tax. Unlevered Net Income (ATCF) does not account for the separation of depreciation, capital expenditures, and changes in Net Working Capital.

From our DCF calculations, the value of Torrington as a stand-alone entity is $1.181 billion. However, the maximum purchase price for Torrington should only be $641 million. The optimum debt amount for this transaction would be $301 million. This amount of debt would result in a total debt to capital ratio for Torrington of 47%, within the range for a BBB “investment grade” debt rating. The combined entities, Torrington-Timken, would produce an interest coverage ratio of 3.2, and a debt ratio of 45%, again within the range for a BBB “debt rating. The purchase would likely be a cash transaction.

With the acceptance of this offer, the capital from private label business will be around twenty five percent, and twenty five percent of Johnsonville’s sales will be from the Palmer offer. Originally, the plan created by a team of line workers and others from Johnsonville Sausage Company was capital from private label business could not exceed fifteen percent due to the face that it will compete with the capital from the rest of the business (Roberts, 1993, p. 14). In order to resolve this issue, Stayer needs to regroup with that specific team that originally created this plan. When doing this, the team must collectively find ways and

Warner-Lambert, an international pharmaceutical and consumer products company in Ireland, planned to launch a new product in 1990 called Niconil which was made for those people who would like to quit smoking. Niconil were different than the existing smoking cessation products in the market. Managers of the company believed that Niconil had many competitive advantages over its competitors and were very confident of the product. But there were some arguments about pricing strategy and marketing communication: Should Niconil be priced at a premium over cigarettes or on a par with cigarettes?What kind of advertising and promotion method they should use? Before launch the product