Chapter 11 Investments SOLUTIONS MANUAL 49. [LO 1] Dana intends to invest $30,000 in either a Treasury bond or a corporate bond. The Treasury bond yields 5 percent before tax and the corporate bond yields 6 percent before tax. Assuming Dana’s federal marginal rate is 25 percent and her marginal state rate is 5 percent which of the two options should she choose? If she were to move to another state where her marginal state rate would be 10 percent, would her choice be any different?
CanGo is not considering the major benefit of an IPO, which is increased capital that comes from investors. If CanGo does not take this form of increased capital into account it will limit their growth. Recommendation 3 Offer an IPO CanGo should offer an IPO, allowing for increased capital. By offering an IPO CanGo will able to take a big step in the right direction of expanding their new ventures. Investors investing in an IPO are aware that it takes time to see a solid return/profit when a company is expanding into new ventures and that risks are involved.
Defining the Issues: Ruth Chris was offered as a newly public organization (IPO) back in 2006 and needed to develop a new business strategy focused on continued growth local and or international. Current stores were seeing consistent revenue growth but the stakeholders needed to see business exposure on the international level for increased revenue. Ruth Chris was challenged with Wall Street expectations for revenue growth and the direction of which it will take next. Foreign expansion plans were identified in Ruth’s Chris senior management team which created interest in international opportunities. Ruth Chris had the following issues on hand; First, Dan Hannah had to decide which countries offer the greatest growth potential with the least risk.
Dealing with political status is measured by decisions and impact on global affairs. Internal scanning deals with core strengths and characteristics of in the nation where business has established the plant. A company’s resources should be identified by managerial, capital, raw materials, and labor. Kudler Fine Foods internal scan should be recognized in dealing with organizationally, and operationally globally. (Pearson and Robinson, 2011).
Metapath´s board believes the company has a great potential as an independent public company, and wonders if a Metapath and CallTech merger makes sense. Case problems and questions: Metapath must analyze how the offer from RSC, with the Participating convertible preferred stock would integrate with the existing preferred stocks already granted to existing shareholders in previous financing rounds. Usually the earlier investors preferred stocks becomes junior to the new VCs preferred, because the new VC won’t take the word of the old VCs that the company is well. The new VC would rather make sure his money is “secured” by having a senior claim through preferred stock. They would need to do a valuation of the participating feature of the Series E preferred stocks in the offer from RSC.
I. Introduction a. Ben & Jerry’s Homemade was on the table for takeover by other firms; specifically four, Dreyer’s, Unilever, Meadowbrook Lane and Chartwell. With the increased competitive market and declining financial performance, takeover bids were coming in. Co-founders Ben Cohen and Jerry Greenfield knew that in order for B&J to maintain its social stature, it would need to remain an independent company; but chief executive Perry Odak felt that the shareholders would be best served by selling the company. II.
Using product offered by Continental Bank would require a higher cost for J&L, and illiquid compared with NYMEX. However, they won’t need to post a margin at the beginning of the contract. The use of a monthly average price a net would be an advantage to J&L. 3. Using the estimate of 4.5 million gallons per month, how would you construct a futures hedge for the next 12 months?
a) HF is a private foundation which gives grants to some focused areas. In recent years, because of significant growth in assets, gifts and grants paid had increased substantially. In response to this circumstance, HF needs to gain more return on their invested assets because it is the only source of income. Besides, the capital market assumptions made by them need to be modified reflected an anticipated environment of lower expected returns resulting from low interest rates, stable macroeconomic conditions, and high valuations of virtually all investment assets. Since the points mentioned above, HF proposes a new investment policy to reallocate their asset position (reduce the domestic public equities from 30% to 21%, increase absolute-return strategies from 10% to 20% and TIPS from 7% to 13%, implement the program called “equitization” and “bondiztion” on absolute-return strategies).
Since Philip Morris gradually tried to diversify its revenue spectrums and arranged acquisition of Kraft after the General Foods Corporation acquisition, the Company needed to secure financial resources to prevent any contingent or unfavorable environment. Based on PM’s financial status (audited FS as of 12/31/88), was able to endure Kraft acquisition, but needs additional financial resources. Philip Morris’ acquisition strategy for Kraft seems risky, but I believe that it was worthy to try. It seems as a very successful strategy to consider the result now, but Philip Morris took a risk to participate in the food industry, which was a significant transition for PM. PM appropriately caught what the synergy impacts are when it acquired well-known business brands such as Kraft Inc.
This is the time when operations “make” a business. However, market requirement is changing, operations must be changing too, Hagen Style did not so suitable for the market later. Although board managers felt really good about the Hagen style, they started to consider adjusting OS when direct marketing using door-to-door representatives was increasingly regard as an old fashioned market channel. It can be inferred that if nothing was done to adapt to market, the operations would “break” the business. Questions.