Case questions - Fall 2011 Case 1: American Home products (Week 7 – not final) 1. How much business risk does American Home Products face? 1. How much financial risk would AHP face at each of the proposed levels of debt in exhibit 3? 2. How much potential value‚ if any‚ can AHP create for its shareholders at each of the proposed levels of debt? 3. What capital structure would you recommend as appropriate for AHP? What
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Massey-Ferguson Case Questions Address the following questions in a 4-5 page write-up of the Massey-Ferguson Case to explore how financing and business decisions are linked: 1) Assess the product-market strategy Massey pursued through 1976. Compare Massey’s strategy with those of its leading competitors. How successful and sensible was their product market strategy through 1976? 2) Characterize and assess Massey’s financial strategy from 1971-1976. Did it complement the product market strategy
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risk. Capital Structure refers to the mix of sources from where the long term funds required in a business may be raised‚ i.e.‚ what should be the proportions of equity share capital‚ preference share capital‚ internal sources‚ debentures‚ and other sources of funds in the total amount of capital which an undertaking may raise for establishing its business. A bad financing decision may result in many forms of higher direct or indirect costs‚ such as lowering stock price‚ higher cost of capital and
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Weighted Average Cost of Capital (WACC) Calculations The weighted average cost of capital (WACC) is the discount rate used in the discounted cash flow analysis. Usually‚ the WACC is the weighted average of the cost of debt (Kd) and the cost of equity (Ke)‚ since debt and equity are the most common sources of funds for the companies. In general‚ the formula for WACC is the following: As implied by the formula itself‚ if a company does not have interest-bearing debts‚ then its WACC would equal
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Objective of the study The primary objective of the study is to gain practical insights of the business world. Case analysis truly fulfills this objective. It is one of the most general and applicable methods of analytical thinking‚ depending only on the division of a problem‚ decision or situation into a sufficient number of separate cases. The derived objectives of this particular case study of ‘Zimmer Holdings (A): Acquisition of Centerpulse‚ Switzerland’ are the following: * To ascertain
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fixed. Then we review capital structure issues related to the adverse investment selection problem of Myers-Majluf. Finally‚ we discuss the timing hypothesis of capital structure. Empirical studies do not consistently support one theory of capital structure under information asymmetry over the others. Thus‚ the review suggests that additional theoretical contributions are needed to help understand and explain findings in the empirical literature. Keywords: capital structure‚ asymmetric information
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| |Market Value of Equity |(i)*(ii) = Rs. 240880.64 crores | Being debt structure absent in Nalco the cost of debt is zero‚ Therefore WACC ( Weighted Average Cost of Capital) |WACC |KePe + KdPd + KpPp | |WACC by (ONGC)
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using the case method. Students will be able to utilize and expand upon previously acquired skills in their MBA courses in general and their finance classes in particular. Critical operating and financial decisions cover the analysis of financial statements‚ calculation of cost of capital‚ generation of optimum capital structures for public and private firms‚ analyzing asset and firm valuations‚ corporate restructuring‚ evaluating potential merger and/or acquisition partners and capital raising strategies
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Executive Summary 3 1. Introduction 4 1.1 Overview of Harvey Norman Holding Limited 4 1.2 Major Competitor 5 1.2.1 JB Hi-Fi 5 1.2.2 Woolworth 5 2. Capital Structures 6 2.1 Types of Funding 6 2.2 Recent Trends of Leverage 7 2.3 Comparison of capital structure with similar companies 9 2.4 Capital expenditures and its financing 10 2.5 Important factors influencing the use of debt financing 10 2.5.1 Tax Advantage 10 2.5.2 Corporate Tax Rate 11
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Harrington Corporation Professor Kevin Rock 1 Background • The Harrington Corporation is the leading producer of commercial desk calendars in the US at the time of the case – Founded by Joshua Harrington in 1920 – Headquartered in Boston – Currently owned by Thaddeus Baring‚ a descendant of the founder • Thaddeus Baring is contemplating retirement – The stress and strain of the calendar business is taking a toll on his health – “Every year another calendar: It’s relentless
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