1. What are the benefits of debt for UST? How do you calculate the value of these benefits? Use a corporate tax rate of 38% to value the tax shields. The benefits of debt to UST are to create an interest tax shield. The interest tax shield directly increases the cash flows paid to equity investors. The present value of that interest tax shield increases the market value of UST as a leveraged firm vs. an unleveraged one‚ if they choose to recapitalize. The value of these benefits is calculated
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considered. Required debt rate and pro forma income statement Risk determinants Credit rating agencies take a wide range of factors – debt raising purpose‚ industry outlook‚ corporate profile and financial measures into account when performing corporate bond rating service. Debt is raised to repurchase shares rather than the normal case of capturing expansion opportunities to strengthen cash flow. This is not going to be regarded favorable to debt holders since the debt coverage ability in terms
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Medical Studies at the UST After graduating from Ateneo‚ he had to go to UST for higher studies. His mother opposed at first she knew what happened to GOMBURZA ‚ she said “Don’t send him to Manila again‚ he knows enough. If he gets to know more‚ the Spaniards will cut off his head”. He enrolled in UST taking up Philosophy and Letter for 2 reasons: His father liked it. He was still uncertain as to what career to pursue (he asked the advised of Fr. Pablo Ramon (Rector of Ateneo) but it was late
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Summary UST Inc. has historically been one of the most profitable companies. Profitability stems from its commanding market share‚ strong name brand recognition‚ historical pricing flexibility‚ and growing smokeless tobacco demand. However‚ UST faces business risks including eroding market share‚ tobacco lawsuits‚ and reduction in innovation. UST Inc. is considering a leveraged recapitalization to help in shielding the tax‚ increasing the share price and eliminating idle cash and debt
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EMBA 8500 #1 Book value of debt Book value of equity Market value of debt Market value of equity Pretax cost of debt After Tax cost of debt rd Market value weights of: Wd Debt We Equity bL Levered beta Rf Risk-free Rate Market Premium RM Ke Cost of equity WACC EBIT - Taxes (34%) EBIAT + Depreciation - Capital expense Change in Net Working Capital Free Cash Flow Value of Assets ( FCF/WACC) CASE # 31 0% Debt 100% Equity $ $ 20‚000 $ $ 20‚000 7.0% 4.62%
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DEBT MANAGEMENT & LEASING CASE STUDIES Case study 1 Situation: Raiyan Mellizas works as a clerk in one of the clothing companies in the Philippines for about seven years. He supports his family and himself through his job. He uses credit cards for additional to pay his essentials and his expenses. Question1: By the time Raiyan couldn’t control his expenditure using credit cards and he is having a difficulty in paying his debt‚ what he supposed to do? Carrying debt can be extremely stressful
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that the primary business risks associated with UST Inc. include but are not limited to: litigation‚ poor diversification of product lines‚ resignation of two key executives‚ lack of innovation and timeliness of new products‚ and erosion of market share due to competitors. Aside from the risks‚ UST has several key attributes that set them apart from other companies. UST continues to be a top company relative to the smokeless tobacco industry and other industries in terms of profitability and has
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Student debt is a huge concern amongst college students‚ especially those that attend Rutgers University. Rutgers University has one of the highest tuition rates in the country among other colleges. According to the 2015-2016 annual financial aid report‚ 23‚797 students took out $110‚732‚898 in Federal Need Based Loans. At this point‚ student debt continues to rise each year due to the rising cost of tuition and the fact that students can’t get a decent‚ high paying job. This problem
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Mohammed @14325 Deena Shalab@16457 Reem Hani Arab @16185 CASE 4 An Introduction to Debt Policy and Value 1 (Table format and content from case) 0% debt/100% equity 25%debt/75% equity 50%debt/50% equity BV of debt 0 $2‚500 $5‚000 BV of equity $10‚000 $7‚500 $5‚000 MV of debt 0 $2‚500 $5‚000 MV of equity $10‚000 $8‚350 $6‚700 Pretax cost of debt 0.07 0.07 0.07 After-tax cost of debt 0.0462 0.0462 0.0462 Market Weight of Debt 0 0.23 0.43 Market Weight of Equity 1.0 0.77 0.57 Un-levered
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Revlon Inc. Case Study: 1). Introduction History: Revlon is a universal company that sells products for skin care‚ cosmetics‚ personal care‚ fragrance and professional products. It was founded in 1932 and began in the nail polish market‚ soon after expanding into lipstick. Over the past six years‚ Revlon has consistently lost revenue and struggled with debt. Even though they have eliminated executive positions‚ reduced staffing and consolidated sales and marketing functions to save an approximate
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