Debt to assets ratio $1,202,134 (total debt) / $1,404,726 (total assets) = 87.4% B.) ROA is a measure of profitability or effectiveness of resource usage calculated by expressing a company’s net income as a percentage of total assets. As for Sepracor, its ROA is 4.5%. This means that Sepracor created 4.5 cents of earnings from each dollar of assets. The ROE for Sepracor is 33.07%, which means that 33.07 cents of assets are created for each dollar that was originally invested.
I calculated an “inventory turnover ratio” which measures the number of times a company sells its inventory during a year. A high rate of turnover indicates easiness in selling inventory; a low rate indicates difficulty. In 2011, the inventory turnover was 6.1. By 2012 the ratio decreased to 5.2. The decrease may be due to a slow ability to turn around merchandise in sales and potentially due to paying a higher cost for goods.
At the beginning of the accounting period, the account held $1,700,000. It received contributions amounting to $3,290,000, bringing the balance of the account up to $4,990,000. The nature of these contributions are mostly unknown - $750,000 of the permanently restricted revenue was in the form of gains on long-term investments, but $2,540,000 may or may not be used as an investment to spur the creation of more revenue. Regardless, the large increase in this classification of net assets is heartening in regards to the fiscal health of the
2. What assumptions can you use to arrive approximately at the share price of $55,400 that was estimated by Kohler Co.? Show how these assumptions impact your valuation. 3. What assumptions can you use to arrive approximately at the share price of $273,000 that was estimated by the dissenting shareholders?
Valuation Questions Question 1 Union Pacific Railroad reported net income of $770 million in 1993, after interest expenses of $320 million. (The corporate tax rate was 36%.) It reported depreciation of $960 million in that year, and capital spending was $1.2 billion. The firm also had $4 billion in debt outstanding on the books, rated AA (carrying a yield to maturity of 8%), trading at par (up from $3.8 billion at the end of 1992). The beta of the stock is 1.05, and there were 200 million shares outstanding (trading at $60 per share), with a book value of $5 billion.
If they balance, the output will remain the same. Interest rates, however, will fall. When interest rates fall, the currency will depreciate (because fewer foreign investors will want domestic currency to hold domestic bonds). The depreciation of the currency at the same level of income will lead to an increase in exports and a decrease in imports, reducing the trade deficit. i LM IS’ Yn LM’ IS Y 3.
Executive bonuses for that year would trigger at or below 10% decline, as long as corporate profitability starts stabilizing. Some issues that may arise are; being unable to meet goals due to poor economy, having smaller bonuses due to the decline of corporate profit. Executive salary lacks incentive for performance therefore bonuses or long term incentives have to be part of compensation. 6. Explain a) A.
2-How does this value affect the choice of securities in which to invest? Ans. This valuation shows that the cost of the equity is more than that of the cost of the debt. The H partners should finance the six flags through debt rather than that of the equity. The plan assigned 95% of the Company’s equity to SFO bondholders and 5% to SFI bondholders.
As a result, Kathon MWX sales are suffering greatly. II. Courses of Action: 1) Allow formulator/distributors to privately package Kathon MWX + Incentivizes formulator/distributors to aggressively sale Kathon MWX + Reduces R&H’s packaging and shipping costs as product can be delivered in bulk - 10 of 12 distributors already agreed to distribute Kathon MWX without private branding - Creates situation of reliance on distribution network to communicate product value to end-user - Poor sales to end-users could result in formulator/distributors terminating MWX contracts - Lack of Kathon brand awareness could mean no brand preference and allow room for new competitors 2) Do not allow formulator/distributors to privately package Kathon MWX + Gives R&H control over Kathon brand equity - Building brand equity will require more expenditure in advertisements and promotion - Less initial incentive for distribution channel to aggressively sale Kathon MWX 3) Specify a higher end-user price point + Lowers retailer risk of cannibalizing sales of competing brands which must be more frequently bought + Incentivizes retailers to aggressively sale Kathon MWX and increases margins in distribution channels + Higher price may communicate higher
This is why the hedge fund thinks that they might be a good investment and this case basically focuses on whether the numbers support this thinking. We have to see what effect a debt of $3 billion will have on the share value of the firm, the debt rating, the cost of capital, the EPS, and the voting control of the Wrigley family. 2. What is your interpretation of the exhibits? Exhibit 1 talks about the five major players in the industry, their main products, major costs, employees, the division in common equity and the bond ratings.