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 Beta 0.8
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1. What are the primary business risks associated with UST Inc.? What are the attributes of UST Inc.? Evaluate from the viewpoint of credit analyst or bond holder. UST Inc. is a smokeless tobacco company with a long tradition and a recognizable brand name. A strong brand name can have lots of associations with high quality‚ revenues‚ soundness‚ growth‚ etc. But‚ this is one of the characteristics that can be like two edged sward. On one side‚ company with long tradition is expected to
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| Group Assignment 1 | UST Case Study | 2/19/2013 | | | | Question 1: In order to calculate the impact of the leverage recapitalization on UST’s value‚ we used the WACC and APV methods to calculate its value before and after the recapitalization. WACC Method Using the WACC method‚ we first derived UST’s return on assets (rA). Since we are given the firm’s market capitalization‚ debt and cash‚ we calculated the current Enterprive Value of UST. We were then able to derive
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Does Borrowing Create Value? If so‚ for whom? If not‚ then why do so many executives concern themselves with leverage? It depends; Borrowing creates value if the company borrows at the optimal amount of debt or less. If the company borrows more than the optimal amount of debt‚ then borrowing will destroy value. Borrowing will increase value of the firm through the tax shield that borrowing brings. Thus‚ the increase value of the firm will increase the value of equity and create value to
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“UST Inc” case study The primary business risks associated with UST are as follows: First‚ legal challenges will cause litigation expenses‚ lawsuits expenses and settlement payments‚ which will decrease the operating income and cash flow and will increase the risks of debt default. From the industry level‚ the smokeless tobacco manufactures have faced less exposure to health related lawsuits than cigarette manufactures because the scientific evidence linking smokeless tobacco to cancer is less
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VISIT TO UST MUSEUM Date of Submission: December 14‚ 2011 As a Thomasian‚ it is just appropriate to visit the UST Museum where it showcases its rich collection of artifacts and important figures that defines our history. Here’s an historical background of the museum. The UST Museum is the oldest museum in the Philippines featuring a rich natural history collection‚ with a diorama of selected Philippine fauna. Other exhibits include the ethnography collection (cultural artifacts)‚ the oriental
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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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A 17- STORY hospital tower with a helipad‚ 1000 doctors trained in multi-disciplinary healthcare and four new health institutes‚ the UST Hospital (USTH) seems not only to have recovered financially‚ but is eager to reach for the stars. But is its P3 billion expansion plan simply too starry-eyed for comfort? Is it too ambitious? Yes‚ according to Dr. Cenon Alfonso‚ president and chief executive officer of USTH. He said that the P3 billion financing for the expansion came from a fixed-term‚ syndicated
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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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property‚ plant‚ and equipment Total Assets Notes payable current portion of Long-term debt Accounts payable Accrued expenses and other current Liabilities Total Current Liabilities $243.6 221.9 21.7 16.1 5.6 0.7 0.3 4.6 2.4 $2.2 $1.0 33.8 8.3 $43.1 $2.4 1.8 1.8 49.1 $1.0 1.0 2.7 26.5 31.2 $251.5 229.4 22.1 14.5 7.6 0.4 0.3 6.9 2.9 $4.0 $1.2 34.0 13.4 $48.6 $2.4 1.5 2.6 55.1 $1.6 1.1 2.1 30.4 35.2 Long term debt‚ less current portion Shareholder’s equity Total Liabilities ahd Equities Return
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