Wrigley's case
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The document analyzes a proposal for Wrigley to take on $3 billion of debt to repurchase shares. It finds that 20% debt is the optimal capital structure, lowering the WACC to 10.08%. However, the benefits are not substantial enough to outweigh the risks of taking on debt, such as reduced cash flows and credit rating. Therefore, Wrigley decides to maintain its conservative financing structure without additional debt.
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First Impressions from Financials
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With the exception of 2018, profit margin and return on equity are at a healthy level.
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Clearly a very liquid corporation, but perhaps too liquid.
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Financial leverage throughout the last three years has been maintained at just about half debt, half equity.
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Financial leverage is at a comfortable level, but under 0.5 is ideal.
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Implications from Financials
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First Impressions from Financials
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Not very liquid, this company does not have enough assets on hand to cover its liabilities.
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Financial leverage is at a comfortable level, but could be slightly improved.
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BDC Capital provides financing options to help recycling businesses in New England, including loans from $50,000 to $500,000 through the Recycling Loan Fund. They have provided over $8 million in loans through this program, helping to raise $24 million in additional financing. BDC Capital also offers term loans from $500,000 to $3 million, mezzanine investments from $750,000 to $5 million, and SBA 504 loans for fixed assets starting at $400,000. These financing solutions can help businesses with needs like working capital, equipment purchases, acquisitions, and real estate.
Leveraged Buyout Acova Radiateurs: Feasibility Review for Baring Capital Inve...
This document provides an analysis of the potential leveraged buyout (LBO) of Acova Radiateurs, a leading manufacturer of radiators in France, by Baring Capital Investors (BCI). It outlines the pros and cons of the deal, BCI's valuation methodology and assumptions, projected financials, and risks associated with the bidding process. The key points are:
1) Acova has strong cash flows, a leading market position, growth opportunities, and experienced management, making it a good LBO candidate. However, restructuring may impact employees and local communities.
2) BCI values Acova using discounted cash flow and internal rate of return methods, projecting cash flows and
2022BCH 1056 PPT.pdf
1) The document discusses the Net Income (NI) approach and Net Operating Income (NOI) approach to determining a firm's optimal capital structure.
2) The NI approach proposes that increasing debt in the capital structure will decrease the weighted average cost of capital (WACC) and increase firm value. The NOI approach argues that capital structure decisions do not affect WACC or firm value.
3) Under the NOI approach, the cost of capital is assumed to remain constant regardless of the debt to equity ratio, so the optimal capital structure is indeterminate.
Organics #3 Finance and economics for organics Carol Brennan Mass. Recyclin...
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BDC Capital provides financing options for recycling and waste management businesses in New England, including the Recycling Loan Fund, asset-based lines of credit, term loans, and mezzanine investments. The Recycling Loan Fund provides loans from $50,000 to $500,000 to supplement bank financing for solid waste recyclers and companies using recycled materials. Since 1995, the Recycling Loan Fund has provided over $8.5 million in loans leading to $24 million in private financing and creating over 900 jobs. BDC Capital also offers asset-based lines of credit from $500,000 to $3,000,000, term loans from $500,000 to $3,000,000,Da tobUr JrL+-, )^ tlCeLDogBankruptcy, Reorganization, an.docx
Da ?tobUr'\ JrL+-, )^ tlCeLDog
Bankruptcy, Reorganization, anti Liquidation
b. After distribution to general crefitors and subordination adjustments are made, how
much of the proceeds are received by the second-mortgage holders? By holders of
the notes payable? By the subordinated debentures? By the common stockholders?
Chapter 24
Subordinated debentures
Total debt
Common equity
Total assets
The trustee's costs total $281,250, and the firm has no accrued taxes or wages. The
debentures are subordinated only to the notes payable. If the firm goes bankrupt and
liquidates, how much will each class of investors receive if a total of $2.5 million is
received from sale ofthe assets?
The Verbrugge Publishing Company's 2012 balance sheet and statement are as
Reorganization follows (in miliions of dollars):
ce Sheet
Current
Intermediate
Problenr 2
Southwestern Wear Inc. has the following balance sheet:
Current assets
Fixed assets
Net fixed
Goodwill
$1,875,000 Accounts payabie
1,875,000 Notes payable
&,759,gqq Total liabilities and equity
$ 37s,000
750,000
750,000
$1,875,000
1,875,000
$ulgqqq
$+z
78
6
135
9
9
$168
153
15
Current
Advance
stock, $112.50 par value
,200,000 shares)
$10.50 preferred stoch no par, callable
at $150 (60,000 shares)
Common stoch $1.50 par value
shares)
Ret earnings
Total assets Total
Income S
Net
expense
operating income
income
EBT
Taxes (50%)
Net income
Dividends on $6 preferred
Dividends on $10.50 preferred
Income available to common stockholders
57
$33€$336
$540.0
516.0
$ 24.0
3.0
$ 27.0
13.5
$ l3.s
7.2
0.6
$_s3
a
Chapter
Wn 2)-l ? )2'2,- t',
&o k903t22 Mergers and Corporate Control
(sr-1)
Valuation
Red Valley is considering an acquisition of Flagg Markets' Fiagg currently has a cost
of equity of 10%; of its financing is in the form of and the rest is in common
equity. Its federal-plus: tax rate is 407o. uisition, Red Vailey expects Flagg to
have the following FCFs the next 3 years (in millions):
Year 2 Year 3
$10.00 $20.00 $2s.00
24.00 20.28
Year 1
exPense
After the free cash flows are expected to at a constant rate of 5D/a, and the capital
will stabilize at 35o/o debt with an rate of 7o/o.
'u. Wtrut is Flagg's unlevered cost of equity? What its levered cost of equity and cost of
capital for the post-horizon period?
b. Uiing the adjusted present value approach, what is Flagg's value of operations to Red Valley?
Easy Problem 1
,,R
Intermediate
' Problems 2-3
,"rr*,rrl,
The fotlowing infonnation is required to work Problems 22-1 through
22-4'
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1
million shares outstanding and a target capitai structure consisting csf 30o/o debt. Yandell's
debt interest rate is 8%. Assume that the risk-free rate of interest is 5% and the market risk
premium is 6%. Both Vandell and Hastings face a 40oio tax rate.
Vandell's free cash flotv (FCFo) is $2 million per year and is expected .
Bf chapter 3
Capital structure refers to the mix of long-term debt and equity used by a firm to finance its operations. The objective is to determine an optimal structure that minimizes the firm's overall cost of capital. Various theories provide different perspectives on the relationship between capital structure and firm value. The Modigliani-Miller theorem states that under certain assumptions, the value of the firm is unaffected by its capital structure. However, when taxes are considered, debt becomes more attractive as interest payments are tax deductible, lowering the overall cost of capital. Determining the appropriate capital structure involves balancing multiple factors to maximize shareholder value.
ch 13 leverage & capital structure Ross.pdf
The document discusses how a firm's capital structure decision impacts its weighted average cost of capital (WACC) and overall firm value. It introduces the concept of financial leverage and how taking on debt can impact earnings per share and return on equity under different scenarios for the firm's earnings before interest and taxes. Taking on the right amount of debt can potentially lower a firm's WACC and maximize its value, but too much debt increases bankruptcy risk.
Integrated Case Chapter 16New World Chemicals Inc.Fina.docx
Integrated Case Chapter 16
New World Chemicals Inc.
Financial Forecasting Sue Wilson, the new financial manager of New World Chemicals (NWC), a California producer of specialized chemicals for use in fruit orchards, must prepare a formal financial forecast for 2012. NWC’s 2011 sales were $2billion, and the marketing department is forecasting a 25% increase for 2012. Wilson thinks the company was operating at a full capacity in 2011, but she is not sure. The first step in her forecast was to assume that key ratios would remain unchanged and that it would be “business as usual” at NWC. The 2011 financial statements, the 2012 initial forecast, and a ratio analysis for 2011 and the 2012 initial forecast are given in Table IC 16.1.
Assume that you were recently hired as Wilson’s assistant and that your first major task is to help her develop the formal financial forecast. She asks you to begin by answering the following questions.
a. Assume (1) that NWC was operating at full capacity in 2011 with respect to all assets, (2) that all assets must grow at the same rate as sales, (3) that accounts payable and accrued liabilities also ill grow at the same rate as sales (4) that the 2011 profit margin and dividend payout will be maintained. Under those conditions, what would the AFN equation predict the company’s financial requirements to be for the coming year?
b. Consultations with several key managers within NWC, including production, inventory, and receivable managers, have yielded some very useful information.
1. NWC’s high DSO is largely due to one significant customer who battled through some hardships the past 2 years but who appears to be financially healthy again and is generating strong cash flow. As a result, NWC’s accounts receivable manager expects the firm to lower receivables enough for a calculated DSO of 34 days without adversely affecting sales.
2. NWC was operating slightly below capacity; but its forecast growth will require a new facility, which is expected to increase NWC’s next fixed assets to $700 million.
3. A relatively new inventory management system (installed last year) has taken some times to catch on and to operate efficiently. NWC’s inventory turnover improved slightly last year, but this year NWC expects even more improvement as inventories decrease and inventory turnover is expected to rise to 10X.
Incorporate that information into the 2012 initial forecast results, as these adjustments to the initial forecast represent the final forecast for 2012 (Hint: Total assets do not change from the initial forecast.)
c. Calculate NWC’s forecast ratios based on its final forecast and compare them with the
company’s 2011 historical ratios, the 2012 initial forecast ratios, and the industry averages.
How does NWC compare with the average firm in its industry, and is the company’s financial
position expected to improve during the coming year? Explain.
d. Based on the financial forecast, c.
Similar to Wrigley's case (20)
Optimization Of Capital Structure Of Firm To Improve Profitability Complete Deck
Optimization Of Capital Structure Of Firm To Improve Profitability Complete Deck
Problem 16 13 current asset usage policypayne products had $1.6
Problem 16 13 current asset usage policypayne products had $1.6
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留信网认证的作用:
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3:国家专业人才认证中心颁发入库证书
4:这个认证书并且可以归档倒地方
5:凡事获得留信网入网的信息将会逐步更新到个人身份内，将在公安局网内查询个人身份证信息后，同步读取人才网入库信息
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本公司拥有海外各大学样板无数，能完美还原海外各大学 Bachelor Diploma degree, Master Degree Diploma
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留信网认证的作用:
1:该专业认证可证明留学生真实身份
2:同时对留学生所学专业登记给予评定
3:国家专业人才认证中心颁发入库证书
4:这个认证书并且可以归档倒地方
5:凡事获得留信网入网的信息将会逐步更新到个人身份内，将在公安局网内查询个人身份证信息后，同步读取人才网入库信息
6:个人职称评审加20分
7:个人信誉贷款加10分
8:在国家人才网主办的国家网络招聘大会中纳入资料，供国家高端企业选择人才
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1:1完美还原海外各大学毕业材料上的工艺：水印，阴影底纹，钢印LOGO烫金烫银，LOGO烫金烫银复合重叠。文字图案浮雕、激光镭射、紫外荧光、温感、复印防伪等防伪工艺。材料咨询办理、认证咨询办理请加学历顾问Q/微741003700
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留信网认证的作用:
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3:国家专业人才认证中心颁发入库证书
4:这个认证书并且可以归档倒地方
5:凡事获得留信网入网的信息将会逐步更新到个人身份内，将在公安局网内查询个人身份证信息后，同步读取人才网入库信息
6:个人职称评审加20分
7:个人信誉贷款加10分
8:在国家人才网主办的国家网络招聘大会中纳入资料，供国家高端企业选择人才
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留信网认证的作用:
1:该专业认证可证明留学生真实身份
2:同时对留学生所学专业登记给予评定
3:国家专业人才认证中心颁发入库证书
4:这个认证书并且可以归档倒地方
5:凡事获得留信网入网的信息将会逐步更新到个人身份内，将在公安局网内查询个人身份证信息后，同步读取人才网入库信息
6:个人职称评审加20分
7:个人信誉贷款加10分
8:在国家人才网主办的国家网络招聘大会中纳入资料，供国家高端企业选择人才
【关于价格问题（保证一手价格）】
我们所定的价格是非常合理的，而且我们现在做得单子大多数都是代理和回头客户介绍的所以一般现在有新的单子 我给客户的都是第一手的代理价格，因为我想坦诚对待大家 不想跟大家在价格方面浪费时间
对于老客户或者被老客户介绍过来的朋友，我们都会适当给一些优惠。
How to Use Payment Vouchers in Odoo 18.
Every business, big or small, deals with outgoing payments. Whether it’s to suppliers for inventory, to employees for salaries, or to vendors for services rendered, keeping track of these expenses is crucial. This is where payment vouchers come in – the unsung heroes of the accounting world.
Enhancing Asset Quality: Strategies for Financial Institutions
Ensuring robust asset quality is not just a mere aspect but a critical cornerstone for the stability and success of financial institutions worldwide. It serves as the bedrock upon which profitability is built and investor confidence is sustained. Therefore, in this presentation, we delve into a comprehensive exploration of strategies that can aid financial institutions in achieving and maintaining superior asset quality.
Machine Learning in Business - A power point presentation.pptx
Power point presentation on machine learning.
Ending stagnation: How to boost prosperity across Scotland
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
1：1制作加拿大麦吉尔大学毕业证硕士学历证书原版一模一样
原版一模一样【微信：741003700 】【加拿大麦吉尔大学毕业证硕士学历证书】【微信：741003700 】学位证，留信认证（真实可查，永久存档）offer、雅思、外壳等材料/诚信可靠,可直接看成品样本，帮您解决无法毕业带来的各种难题！外壳，原版制作，诚信可靠，可直接看成品样本。行业标杆！精益求精，诚心合作，真诚制作！多年品质 ,按需精细制作，24小时接单,全套进口原装设备。十五年致力于帮助留学生解决难题，包您满意。
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1:1完美还原海外各大学毕业材料上的工艺：水印，阴影底纹，钢印LOGO烫金烫银，LOGO烫金烫银复合重叠。文字图案浮雕、激光镭射、紫外荧光、温感、复印防伪等防伪工艺。材料咨询办理、认证咨询办理请加学历顾问Q/微741003700
留信网认证的作用:
1:该专业认证可证明留学生真实身份
2:同时对留学生所学专业登记给予评定
3:国家专业人才认证中心颁发入库证书
4:这个认证书并且可以归档倒地方
5:凡事获得留信网入网的信息将会逐步更新到个人身份内，将在公安局网内查询个人身份证信息后，同步读取人才网入库信息
6:个人职称评审加20分
7:个人信誉贷款加10分
8:在国家人才网主办的国家网络招聘大会中纳入资料，供国家高端企业选择人才
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Wrigley's case
- 1. The Wm. Wrigley Jr. Company: Capital Structure, Valuation and Cost of Capital EVAN MUCHNICKI AND JOSEPH RUSHTON 1
- 2. Background Information Wrigley's is the largest manufacturer of chewing gum and holds the largest market share in a highly competitive industry with a few dominant players Has been conservatively financed with no debt with a total market value of equity of $13.102 billion Financial Information - Total assets of $1.76 billion - Marginal Tax Rate of 40% - 232.44 million shares outstanding and the Wrigley family owns 21% of common stock and 58% of class B common stock 2
- 3. Capital Restructure Proposal Approached by Aurora Borealis to acquire $3 billion worth of debt to impose value on the firm to use to repurchase shares or pay a dividend We will look into how that will affect the company and what capital structure optimizes our value Now taking a closer look at the proposal… 3
- 4. Debt Rating Expect to have a credit rating between BB and B and according to the US Corporate Debt Obligations, our debt will yield 13% 4
- 5. WACC – Proposed Capital Structure Pre-Debt WACC (CAPM): 4.86%+.75(7%) =10.11% Post-Debt WACC ($3 billion) - Levered Beta: .75(1 +(1 - .4)(.2/.8)) = .86 - New Cost of Equity: 4.86% + .86(7%) = 10.88% - WACC = (.13)(.2)(1 - .4) + (.1088)(.8) = 10.08% 5
- 6. Market Value of the Firm • The addition of $3 billion worth of debt increases the market value to $14.3 billion • The PV of the tax shield of the added debt comes to $1.2 billion 6
- 7. WACC = 10.08% Price = $61.53 Assumptions: - $3 billion of acquired debt - Risk Free Rate = 4.86% - Market Risk Premium = 7% - Levered Beta = .86 7
- 8. Optimal Capital Structure The optimal capital structure consists of 20% debt, which is about what was proposed by Blanka Dobrynin 8
- 9. Impact on Cost of Capital As we increase the amount of debt, both the cost of debt and the cost of equity continue to increase The WACC is the lowest at 20% debt and rises thereafter because the distress costs begin to outweigh the tax benefits of taking on debt The riskiness of the firm also increases due to the increasing debt to equity ratio 9
- 10. Impact on EPS 10 - In this scenario, we discovered that EPS actually decreased because the net income was lowered good amount by the addition of the debt
- 11. Dividends or Repurchase If we were to take on debt we decided it would be more beneficial to repurchase shares since Wrigley already pays dividends and it will: Increase our voting control Expand the market share Increase the value of the firm 11
- 12. Impact on Share Value and Voting Control 12
- 13. • Repurchasing of 48.755 million shares • Increases the Wrigley Family stock ownership from 27.8% to 35.2% and voting control from 46.6% to 50.6% 13
- 14. Conclusion We have found that an optimal capital structure would be, as Blanka Dobrynin suggested $3 billion worth of debt (20%), which would slightly benefit Wrigley but… We have decided that these benefits are not substantial enough compared to the risks associated with taking on debt such as Concentrated ownership in the Wrigley family that may deter investors Restricted cash flows since we would owe repayment on debt Lowers our credit rating and introduces, although minimal, bankruptcy costs We have successfully captured the largest market share in the industry with conservative financing and it is not necessary to take on more risk 14