The MCI’s source of funds has been emission of stocks. Common stocks as IPO of 6M shares and $27.070.000‚00. An issue of 9.600.000‚00 common stock 5 years warrant attached. What have been MCI sources of funds in the past (1972-1983)? What’s your opinion? Around 1972 MCI issued equity and later on time when the company started going well they issued debentures and convertible debentures. The main raison to do that is because equity cost use to be higher. First of all they issued debentures
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that the board of directors at MCI was divided between two possible solutions. Should the company finance the repurchase by increasing MCI’s debt financing by at least doubling the current debt-equity ration that stood at 36% at that time (MCI)? Conversely‚ would a more conservative approach of using an open-market purchase program‚ announcing its intentions to repurchase its stock from "time to time" but only as corporate funds become available‚ be more appropriate (MCI)? The answer to this question
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QUESTIONS MCI Communications Corporation (1983) 1-What is the likely level of MCI’s external needs over the next several years? By how much could they be expected to vary? Why? 2-Critique MCI’s past financial strtategy‚ giving attention to the types of securities on which it has relied. Why did MCI finance itself in the manner it did? 3-Based upon your analysis of the outlook for MCI and the competitive and regulatory evolution of the industry‚ recommend a capital structure policy for MCI and
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Homework #5 1) MCI initially financed its needs through equity issuance. This was done because MCI’s source of revenue was insecure in its infancy‚ and this allowed them to raise capital without being tied down by excessive debt repayments further down the road. To continue raising capital after MCI began posting early profits (particularly to repay short-term bank debt)‚ the company issued convertible preferred stock. This preferred stock was able to attract capital due to its dividend paying
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1. What message is MCI trying to send to financial markets? From 1993 until the start of 1995‚ MCI’s stock had outperformed the S&P. However‚ in 1995‚ the stock’s performance was poorer than the S&P. With shareholder’s getting restless‚ the idea of a stock repurchase was being considered. Depending on which option MCI chooses—stock repurchase with debt issuance or open market repurchase program—the message being sent could be different. Let’s consider option one—MCI issues debt and uses the
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Question 1 MCI is going to need significant cash in order to undertake the capital investment plans that will allow it to achieve the 20% market share that it desires. The projections call for capital expenditures ranging from $890 mln in 1984 to $2.76 bln in 1987. With an existing cash position of $542 mln‚ MCI can cover its capital expenditures requirements for only a year (1984). Thereafter‚ the financing needs range from $732 mln in 1985 to $1.43 bln in 1987‚ assuming that access charges do
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MCI case ’Convertible Bond’: a bond that can be converted into a predetermined amount of the company’s equity at certain times during its life‚ usually at the discretion of the bondholder. “conversion ratio’’: the number of shares that the investor receives if he or she exercises the conversion MCI provided long distance telecommunications service in competition with AT&T. Timeline: 1971: FCC allowed new companies to enter the market for specialised long distance services‚ which consisted chiefly
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For the exclusive use of Y. LI Harvard Business School 9-284-057 Rev. June 1‚ 1998 MCI Communications Corp.‚ 1983 In April 1983 Wayne English‚ chief financial officer of MCI Communications Corp.‚ faced the problem of setting financial policy in an environment characterized by a large potential demand for external funding and great uncertainty concerning MCI’s future. MCI‚ which provided long distance telecommunications services in competition with AT&T‚ had seen its revenues grow from almost nothing
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growth program and they are willing to sacrifice profit margins to achieve it. Consequently‚ the company’s external financing requirements will likely increase in years to come. Basing our projections off of the exhibits and assumptions provided in the case‚ we estimate MCI’s will invest approximately $3.8B over the next four years (1984-1987) of which $3.3B will need to come from external sources. As capital expenditures outstrip funds from operations‚ undoubtedly the company will need to seek further
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MCI CASE ANALYSIS: PRESENTED: THURSDAY JUNE 15‚ 2006 MCI CASE ANALYSIS INTRODUCTION MCI is at a critical point in their company history. After going public in 1972 they experienced several years of operating losses. Then in 1974 the FCC ordered MCI ’s largest competitor AT&T to supply interconnection to MCI and the rest of the long distance market. With a more even playing field the opportunities to increase market share and revenue were significant. In order to maximize this opportunity
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