There is $2.5 million sinking fund required which leaves $12.5 million outstanding at maturity. The issues with this method are as follows: Long-term-debt can be burdensome and can stunt or slow growth of the company. The company has to payback what was borrowed plus the interest on the debt. It also puts stockholders and management who are primary holders of stock at risk, because if the company earnings are substantially lower than what was forecasted then the bondholders can virtually gain control of company. The second alternative would be the possibility of issuing new common stock of 3 million shares offered at $17.75 per share.
Exports of mining, petroleum, and infrastructure equipment may help multinational corporations and developed countries access cheaper raw materials, with few benefits for the residents of developing countries. Changes will help increase imports, but in return will drain the treasuries and currency reserves of developing countries and create heavy debt burdens. Question #2: The Ex-Im Bank will provide innumerable federal programs for the subsidized U.S. companies which will include financing and insurance (Ball, Geringer, McNett, and Minor, (2013), pg. 351). Many U.S. companies claim to oppose foreign assistance linked to
He shouts up: “we’re going to leave these here so you can see what 1,200 people actually look like”. The 1,200 body bags represent the 1,200 deaths contributed to tobacco use every day. The third step in communication process used by the AFL to transmit its
9/18/13 Alliance Concrete Executive Summary: Based on available financial data and forecasts, Alliance Concrete should pay the $3million dividend to National as well as invest the full $16million in new fixed assets to assure that there are not shutdowns, as there were in 2004. By paying the dividend and purchasing new equipment Alliance will need to renegotiate with its bank in order to delay any scheduled debt retirement and instead acquire additional debt financing. Doing so will ensure that Alliance maximizes its Return on Equity as well as continue its trend of increasing earnings, which is especially important considering the slowdown in the real estate market. 1. A reduction in the dividend would decrease the need for long-term debt in multiple ways.
In recent years, the company increased its number of outstanding share to finance its acquisitions, which raised the payout ratio to more than 50% in 2006. Blaine Kitchenware fears that such a dividend policy isn’t sustainable in the future. Indeed, if the company keeps a high dividend payout without the cash flow to back it up, it will have to reduce its investment plans or turn to investors for additional debt or equity financing. As pointed by a banker, because the company is over-liquid and under-levered, using Blaine kitchenware’s excess cash and new borrowing, a private equity firm could buy all the outstanding share of the company. In light of that discovery and fearing this hostile takeover, Victor Dubinski is thinking of revising the company’s financial policy (i.e.
Assignment #2: CROSBY MANUFACTURING CORPORATION Executive Summary Crosby Manufacturing Corporation is a $ 250-Million-a-year electronics component manufacturing firm. Wilfred “Willy” Livingston became president in 2005, and in his long-range plan to obtain large government contracts, laid into two acts, which the first step consisted of the restructuration of the 700 employees organization into a modified matrix structure. And on October 2007, the second phase consisted of changing the computer system into a more advance model in order to update the management cost and control system( MCCS) to ensure the growth of Crosby Manufacturing Corporation. He violated the policy and appointed Tim Emary as a project manager, an employee from the group planning department, only because in his vision Tim Emary can lay out a schedule and have the job done. 1.
CCI would be taking a somewhat high risk by issuing additional stock due to the uncertainty about the offering price. Having a low P/E ratio with respect to the rest of the market, and the replacement cost of the firm being greater than its book value (argument 3), there is a good chance that the current stock price and the proposed offering Although long-term debt is a better financing choice a few of the drawbacks are pointed out. Debt holders claim profit before equity holders, so the chance that profits may be lower than expected, increases risk to equity may reduce or impede stock value. However, in extreme financial situations such as a recession period, CCI would still be able to increase its cash during a recession period with all debt capital structure. Also, there is a remaining 12.5 million that would have to be paid at the expiration of the bonds, but that could be paid off by issuing new bonds or additional equity at that time.
On the other hand MI backed mainly by shareholders equity and performing assets and thus would be able to issue new debt increasing value for both shareholders and the corporation. Thus the shareholders would gain at the expense of bond holders and the equity value of the company would increase. b) Bondholders Bondholders had a lot to lose as according to Project Chariot almost all the debt would be assigned to HM. Given the problems in real estate and hotel markets there was a concern of HM’s ability to meet its debt payment and there was a high probability of default. This meant that the risk was issued at investment grade but now was not backed by valuable assets of the companies which were to be spun off to MI which was to be backed by equity.
The first weakness is that as more stocks are outstanding, the amount of dividends payable increases. The value of the stock may also decrease if there are too many shares available. Another disadvantage is that stock financing is not tax deductible. Finally, as stocks are issued, there are more shareholders to please. Organizations face many opportunities when selecting a means to meet capital needs.
As there are more sellers, this causes investors to adopt some doubt and therefore encourages more selling. This will therefore cause the share price to decrease. 1c) Take-over - This is when a company tries to achieve a large control of another company by buying a large majority of shares within the said company. By having more shares, the company who bought the shares will have a larger role in the