Question 1. Metapath’s capital structure and rounds of financing Analyze Metapath’s capital structure, in particular the various forms and prices of preferred stock from the multiple rounds of financing. How has this capital structure affected the offer from
Question 5: Evaluate the Put-Warrant/Convertible Bond proposal. Does it solve Intel’s capital structure dilemma? What arguments might be made in favor of it? Intel’s capital structure dilemma was that it was holding too much cash on hand. Eventually, there were three available strategies or alternatives that Intel could undertake in terms
* Whether they considered Blaine’s financial posture was very conservative as they have only twice borrowed beyond seasonal working capital needs. Although the company has very conservative roots it is important that they realize the need to acquire leverage and buy back stock. The shares outstanding have amplified, which has consecutively increased their payout ratio to an outstanding more than fifty percent of their net income being spent on dividends. It is very important that Blaine’s overturns the dilution of the shareholders percentage of ownership and put a stop to the trend in their payout ratio as it is unsustainable. The primary advantage to the repurchase of stock is that stock holders that remain will have a higher owner percentage (presumably the family member won’t sell their stock) and therefore the payout ratio can descend and earnings per share can ascend.
1. What are the annual cash outlays associated with the bond issue? The common stock issue/ The bond principal repayment will be $6.25 million annually. The cash dividends will be $7.5 million annually on additional stock. 2. How do you respond to each director’s assessment of the financing decision? The following assessments
BBNY’s Present Challenge – Holding large Cash and selecting optimal capital structure BBNY’s business philosophy thus far was based on the ‘cash is king’ notion and BBNY has strayed away from leveraging debt in its business operations. BBNY was sitting on $400 million dollars excess cash and there is no debt in its capital structure; which was the concerning factor for the BBNY investor community.
Walgreens: The Corporate Financial Decision Making Analysis Walgreens’ principal activity is to operate a chain of retail drugstores that sells prescription and nonprescription drugs. The company also carries additional product lines like general merchandise including cosmetics, food, beverages and photofinishing. Walgreens is one of the fastest growing retailers in the
As shown in the ratios chart, working capital has increased by $13M. Maturities of short-term investments and cash flow from operations are projected to be sufficient to sustain the company’s overall financing needs, including capital expenditures. The following corporate strategic plan identifies a project that needs financial backing.
Statement of Problem Bed, Bath and Beyond (BBBY) currently has $400 million more in cash than they need for ongoing growth and operations requirements. While the company is financially sound analysts and investors worry about the company’s capital structure decisions. Investors do not want to see that much cash on the books and worry that the current capital structure is not the most effective for the future. They prefer that BBBY change their capital structure by paying out excess cash and issuing debt. This could allow BBBY to improve their return on equity and raise earnings per share. Given the low interest rates available it seems like the perfect time for BBBY to add debt to its capital structure. Until now they
OPTIMAL CAPITAL STRUCTURE (OCS) Nevertheless, the use of the Optimal Capital Structure (OCS) is the right techniques to be used in order to acquire the right combination of debt and equity that can maximize the
0.94. Using the capital asset pricing model, the cost of equity comes to 9.65%. Rf Beta (Project) MRP Cost of Equity 3.10% 0.94 7% K (e) = K (rf) + beta (project) * MRP K(e) = 9.65% Capital Structure The firm has decided to increase the debt finance component portion from 20% to 30% which is a good decision since the interest payments are 100% tax deductible. The appropriate capital structure would be to
The statement of cash flows outlines some of the changes to the capital structure. The company added $164.5 million in a consolidated loan facility, and it paid out $138.1 million in dividends. There were no share buybacks during the year. The company states in the annual report (p.4) that it intends to maintain a conservative gearing ratio. The company in this section attributes its increased borrowings to projects and opportunities on which it has embarked. These investments lie within the integrated retail, franchise and property system. One of the
The next item of focus is Riordan 's balance sheet. "The balance sheet indicates what the firm owns and how these assets are financed in the form of liabilities or ownership interest." (Block and Hirt, 2005, p.28). The assets of Riordan have gone up roughly three quarter of a million dollars. These assets have been financed through liabilities or stockholders ' equity. (Block and Hirt, 2005, p.28). If the assets are taken and divided by the stockholders equity the result is that the stock price has dropped from $2.78 a share in 2004 to $1.56 a share in 2005. The opportunities for this area would be to reduce long-term debt, which increased over $200,000 in the past year.
This case gives comprehensive coverage of a firm’s decision to start an initial public offering but also to go through the process of going public. TRX is a company managing travel-and-data processing activities for its clients. Its target market has significant transaction volume in travel agencies, travel suppliers, large corporation and credit-card issuer. Regarding its service offerings, it focuses on transaction processing, data integration and customer care. Its fortune tied to the overall health of travel industry. TRX generates a lot of revenue but less profit. Trip Davis, Chief Executive Officer of TRX, Inc. decided it was time to raise capital in order to fund the growth of the company. His main focus was to accomplish a strategic recapitalization of TRX. This case gives a brief history about several events from the company’s incorporation in 1999 through the completion of an IPO in September 2005. The main goal is to raise capital but there is also a consideration of another reason for going public. In November 1999, they tried to go public but the IPO was never finalized. After the failed IPO, Trip Davis and TRX president decided to focus on strategic investors in order to raise $20 million convertible into equity at $11 per share. In 2004, he believed that Sabre, Inc. one of the largest strategic investors was not working for the best interest of the company. He took into consideration three possible capital raising options: IPO, private placement of equity, or
In 2002 the Hershey trust company board decided to sell school shares from Hershey stock. The board wanted to sell the 33% of Hershey shares at premium and reinvest the money in another company to make profit for the school. The board was responsible to oversees the investment and make sure the school was doing fine. Looking on this issue as financial personnel the board decision was better to sell stocks at premium and reinvest in another company.
Introduction SKYCITY Entertainment Group Limited (SKY) is a leading entertainment and gaming business which has been a successful brand and has an iconic performance status since when the company first listed in New Zealand NZX in 1996. The core business of SKY is operating monopoly casinos in New Zealand (Auckland, Hamilton