Reasons for CPKs success (p.3) Ways to facilitate the success of CPK (p.3-4) Anticipated effect of changing the capital structure on return on equity (p.4) Anticipated effect of changing the capital structure on cost of capital (p.5) Expected number of shares of CPK that can be repurchased (p.6-7) Anticipated effect of changing the capital structure on CPKs stock price (p.6-7) Our recommendation (p.7) In order to explore whether or not California Pizza Kitchen should change their capital structure‚ we
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digital revolution. Problem By the end of 2012‚ American Greetings was at the bottom of its peer group‚ with a low EV-EBITDA multiple‚ market-to-book below 1‚ a 6x PE ratio‚ and a share price of $12.51 that had dropped significantly in the months prior. American Greetings has historically used a share repurchase strategy in times of low equity. This is a good defense if the stock price is down temporarily‚ but the low valuation could also be a sign of larger trouble where it would be wise to
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with the analysis of a stock repurchase. He has operational experience‚ but little financial management experience (he does not have any debt on his balance sheet!). As a result‚ he needs your help convincing his board of directors that the stock repurchase is a good idea. The board is more financially conservative than Mr. Dubinski. Mr. Dubinski wants you to evaluate a scenario where Blaine Kitchenware‚ Inc. (BKI) will repurchase 14 million shares at $18.50 per share. To do so‚ BKI will borrow $50
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accomplish through her active-investor strategy? 2. What will be the effects of issuing $3 billion of new debt and using the proceeds either to pay a dividend or to repurchase shares on: a. Wrigley’s outstanding shares? b. Wrigley’s book value of equity? c. The price per share of Wrigley stock? d. Earnings per share? e. Debt interest coverage ratios and financial flexibility? f. Voting control by the Wrigley family? 3. What is Wrigley’s current (pre-re-capitalization)
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-Martin Industries just paid an annual dividend of $1.30 a share. The market price of the stock is $36.80 and the growth rate is 6.0 percent. What is the firm’s cost of equity? RE = [$1.30 × (1 + 0.060)] / $36.80 + 0.060 = 0.097446 = 9.74 percent (3) - The Bet-r-Bilt Company has a 5-year bond outstanding with a 4.30 percent coupon. Interest payments are paid semi-annually. The face amount of the bond is $1‚000. This bond is currently selling for 93 percent of its face value. What is the company’s
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management of working capital: Improve margins Reduce obselesce cost Company can fund additional growth without funding from outside A combination of WCM efficiency and profit margin improvement can fund growth‚ repayment of debt and buy back of shares 1) The first liability assumption is that liabilities remain fixed at 1996 levels. If the 1996 profit margin of 5.1% remains constant‚ profits will fund $405 million of the additional assets. Dell would require additional funding of $315 million
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A. What tactics did the activist investor William Ackman (Pershing Capital) pursue in his campaigns against Wendy’s and McDonalds? Briefly describe each tactic used and the way in which each tactic might help Ackman to achieve his goals. What other tactics could Ackman have employed to achieve his goals? B. What did Ackman ultimately hope to achieve through his activism? What role‚ if any‚ did corporate governance issues play in Ackman’s activist campaigns? C. With the benefit of hindsight
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and digital‚ or mixed-signal‚ technology. In addition to Tom and Jessica‚ Nolan Pittman‚ who provided capital for the company‚ is the third primary owner. Each owns 25 percent of the 1 million shares outstanding. The company has several other individuals‚ including current employees‚ who own the remaining shares. Recently‚ the company designed a new computer motherboard. The company’s design is both more efficient and less expensive to manufacture‚ and the ETI design is expected to become standard
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policies are appropriate? Why or why not? 2. Should Dubinski recommend a large share repurchase to Blaine’s board? What are the primary advantages and disadvantages of such a move? 3. Consider the following share repurchase proposal: Blaine will use $209 million of cash from its balance sheet and $50 million in new debt-bearing interest at the rate of 6.75% to repurchase 14.0 million shares at a price of $18.50 per share. How would such a buyback affect Blaine? Consider the impact on‚ among other
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the highest amount of cash‚ both Ford’s earnings per share of 5.86 and stock price of $51.38 are lower than General Motors and DaimlerChrysler in 1999. Ford’s higher debt to equity ratio during this period may be the reason that caused the company’s cost of capital to increase and eventually decreasing the stock price. Q.2) How does VEP work? The main function of the Value Enhancement Plan (VEP) consists of both the options of stock repurchase and a stock exchange.Through this plan‚ shareholders
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