and customers‚ rapid growth of lovely tourist destinations etc. [pic] Airline industry is considered as capital intensive industry. It needs big investment for huge range of expensive equipment and airplane‚ from airplanes to flight simulators to maintenance hangars‚ aircraft tugs‚ airport counter space‚ gates etc. Consequently airline industry has become one of the most capital intensive industries in the world that require large amount
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Contents 1.0 Introduction 1 2.0 Executive Summary 1 3.0 Capital Structure 2 3.1 Types of Funding Utilised by Billabong 3 3.2 Recent trend in the level of leverage 3 3.3 Capital expenditure and financing: 5 3.4 Capital Structure of Similar Firms 6 3.5 Company Characteristics and Leverage policy 7 3.5.1 Taxes 8 3.5.2 Trade off Model 8 3.5.3 Pecking Order of Financing Choices 9 3.5.4 Signalling Theory 9 3.6 Optimal Capital Structure 10 4.0 Dividend Policy 10 4.1 Billabong dividend history
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Learning Outcomes Outcome Expectation 1. Students can calculate the value of fixed income securities Students can compute bond prices for use in unstructured case analysis. Applications include cost of capital computations for a corporation with a variety of divisions‚ optimal capital structure‚ leveraged buyouts‚ etc. 2. Students can calculate the value of equity securities Students can propose an appropriate value for equity in unstructured case analysis. Student can prepare a report detailing
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obligation that bids a borrower to specific actions or outcomes as a condition for extending a loan) that read as follows: “The company must maintain net working capital (defined for purposes of this loan as accounts receivable plus inventories minus accounts payable) of at least $4 million. For purposes of this covenant‚ net working capital will be measured at the end of each fiscal year.” Is TCI likely to be able to satisfy this covenant in both 1996 and 1997? 6. As a lender‚ would you be willing
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of its three basic sources of capital—long-term debt‚ preferred stock‚ and common stock equity—for various ranges of new financing. Source of Capital Range of New Financing After Tax Cost Long-term debt $0 to 320‚000 6% $320‚000 and above 8% Preferred stock $0 and above 17% Common stock equity $0 to $200‚000 20% $200‚000 and above 24% The company’s capital structure weights used in calculating its weighted average cost of capital are shown in the following table
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Blaine Kitchenware Questions: 1) Do you believe that Blaine’s current capital structure and payout 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 an interest rate of 6.75% to repurchase 14 million shares
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operations are primarily in America and Canada‚ but it has also made expansions in Australia and Chile regarding investments in gold exploration. New Earths balance sheet presents a large amount of cash‚ will further analysis showing a simple debt structure‚ and a reasonable leverage ratio with no risk of liquidity. New Earth has a strong financial position shown in basic accounting concepts which leads to the conclusion that New Earth has been very successful. New Earth wants to diversify into base
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Optimal Capital Structure According to Miller and Modigliani’s (1958) first proposition‚ the value of a firm is independent of its capital structure‚ assuming no corporate taxes. It was later demonstrated that the existence of debt in the capital structure creates a debt shield that increases the value of the firm by the present value of the tax shield (Miller & Modigliani‚ 1963). This line of reasoning implies that debt financing adds significant value to the firm and an optimal capital structure
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Bibliography: Adelegan‚ O.‚ 2007‚ “Effect of Taxes on Business Financing Decisions and Firm Value in Nigeria”‚ International Journal of Finance and Economics Baxter‚N.‚ 1967‚ “Leverage‚ Risk of ruin and the Cost of Capital”‚ The Journal of Finance‚ Vol.22‚ pp.395-403 Cooper‚ A.I.‚ And Nyborg‚ G.K.‚ 2005‚ “The Value of Tax Shields is Equal to the Present Value of Tax Shield”‚ Journal of Financial Economics Cooper‚ I.‚ 2007‚ “Valuing the Debt Tax Shield” Copeland‚ et
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1. How much value do you expect to be created by operating improvements and capital structure changes envisioned by CD&R? CD&R proposed changes to the following areas. a. US RAC on-airport operating expenses: Labor per transaction‚ administrative and other costs had increased 41%‚ 65% and 30% respectively between 2000 and 2005. In addition‚ margins were not constant across locations and varied from 32% to -7%. CD&R proposed that the operating expenses could be reduced resulting in cost savings
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