b. Invest in projects that increase shareholder value: Marriott can increase shareholder value by making wise investment decisions and generating healthy returns on invested capital i.e. by investing in projects with positive net present value (NPV). Such projects will increase its sales as well as its cash flows and consequently result in increasing the EPS. c. Optimize the use of debt in the capital structure: Relying heavily on equity would increase the cost to investors whereas relying too much on debt would put the business in a precarious position.
For example, the government could try these policies Encourage Fixed Rate Mortgages – Makes mortgages less sensitive to interest rate changes. However, in practise this is difficult to do. Also, it may take along time to change consumer’s preferences from variable mortgages. Higher Stamp Duty. Increased taxes on buying a house will discourage speculative buying – this is a major cause of house price volatility.
There are several strengths in Wal-Mart raising capital by selling stock. Selling stock is less risky than debt financing and it allows the company to raise money without giving up the amount of control it would relinquish from merging with another company. Wal-Mart is already a publicly traded company, so it would be easy for them to issue more stock. Despite all the strengths there are to finance projects through selling stock, there are some weaknesses. The first weakness is that as more stocks are outstanding, the amount of dividends payable increases.
This would also help improve the company’s inventory turnover ratio from 4.7 to the industry average of 6.1. The firm’s debt ratio anticipation of 44.17% is better than the market average and will allow the company to pay down its debt quicker than competitors and have more cash on hand. The extra cash on hand provides more liquidity and is attractive to potential investors. However, these numbers are based on high projections. If such numbers are not reached the company is considered underperforming and makes an unattractive appeal to investors.
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.
As well as increasing living standards, it also benefits the government, as they will see an increase in revenue collected in income tax. This will allow the government to further improve public services such as healthcare, and as the quality of healthcare increases, so does the quality of life for the population. Another benefit of economic growth is that unemployment will fall. As companies and services expand, they can output a great deal more, and therefore more labour is demanded, this means that unemployment will fall. If unemployment falls, less people will be claiming unemployment benefits and other similar pay-outs from the government, this will allow a lot of tax to be spent on other things, such as expanding public services further, which also leads to an increase in living standards.
In addition, MobAir has significantly more production capacity. Although having large production capacity is a liability during times of weak demand, such as the ones characterizing the current market, it becomes an advantage during times of strong demand. With larger capacity, Team PinkLadies has the ability to grow its sales and thus its market share more rapidly. Understanding the threat that this presents, MobAir has begun increasing plant
Projects which increase shareholder value could be formed with benchmark hurdle rates, the company can ensure a return on projects which results in profitable and competitive advantage. 2) Optimize the use of debt in the capital structure: Marriott invests a lot of money in long term assets that's why it is really necessary for the company to maximize and optimize its debt. And the company has an A rating. It means that Marriott is able to borrow an important amount of money to invest and it could be heavily indebted. Therefore, it is really important to optimize the debt level.
A higher inventory always means to have some financial capital bounded. To compensate some part of this effect, Rolls-Royce’s operations sets the goal to improve its management of the financial working capital. In order to gain higher responsiveness, Rolls-Royce increased inventory, even this may have on an insulated view a negative impact to the financial performance. However, by increasing
Since privatisation, companies such as BT, and British Airways have shown degrees of improved efficiency and higher profitability due to the competitiveness within their respective industries. It can also be noticed that vast improvements in technology have occurred due to investment in order to achieve these efficiency and profit increases. As efficiencies increase, firms are more willing to produce at a lower price, effectively shifting the supply curve to the right. This causes a reduction in the price from P1 to P2 and an increase in the equilibrium quantity from Q1 to Q2. Another possible advantage of privatisation is an increase in competition as the privatisation of state owned monopolies usually occurs at the same time as deregulation of the industry.