Q3. How much value, if any, does Buffett derive from the credit agreement? There are two parts of the credit agreement, the 8-year term loan and the penny warrants. The $400 million term loan accompanying with a $45 million revolving credit facility will give Buffett a chance to earn at an interest rate of 10.5%. Based on the result of calculation, the NPV that Berkshire can gain is $51.2 million. Berkshire would receive “penny warrants”, which would represent 19.9% of Media General’s common shares outstanding if exercised. By using Black–Scholes–Merton model, the value of the warrants equals to $14,564,265 (We directly used the historical volatility in MEG management compensation – employee stock options). Besides, after relieving the newspaper …show more content…
While MEG’s broadcasting decreased 17% and digital media increased 8%, its newspaper was down 43%. According to Figure 1, only newspaper division has kept declining since 2007. By contrast, digital revenues on local websites have increased for many years, from MEG Annual Reports, various years. Even broadcasting business performed better than newspaper, which met a dramatically increase in 2010. Given the sustain development of electronic media, it’s inadvisable for MEG to sell its digital media or broadcasting division. As for other tradeable assets, since MEG eliminated its dividend in 2009 and reached a nearly 100% debt/total capitalization ratio in 2011, we speculated that MEG had already used up its non-core assets to lift its financial …show more content…
Firstly, this acquisition is beneficial to MEG’s future expansion. MEG will gain enough money to improve the financial situation and develop other business better, such as digital media and TV. Compared with newspaper division, these businesses have more potential to grow stably. More concentrate on these fields is the correct way to develop the company. Additionally, Berkshire Hathaway has already run its own media business since 1973. Exhibit 5 shows that The Buffalo News has experienced a quite slow decrease since 2000, which indicated the firm has enough experience to manage MEG’s newspaper business well. Also, Buffet will become shareholder after the purchase, in result of this MEG will get more enterprise resource from Buffett. Secondly, this bid is beneficial to Marshall Morton’s own career development. To sell the money-losing business will help his company more concentrate on the profitable business. Because of the profit growth in the future, Marshall Morton’s reputation will increase as well. At the same time, after the bid news release, MEG’s stock will be expected to increase. Marshall Morton has been MEG’s CEO since 2005, and Exhibit 6 shows that there existed 6 employee stock options from 2005 to 2011. Once MEG turns the business around, Marshall Morton would benefit a lot from the stock increase, not to mention rebuilding all shareholders’ confidence on
In the end, the decisive decision will be based on a dollar amount. With the company’s legal and economic environment, there are certain benefits given; limited regulation, individual property rights, and healthy competition.
Introduction Blake Goodwin is the CEO of Goodwin Wealth Management. He was deciding to hire a consultant to make an assessment of his situation. Three large companies had expressed interest to acquire Goodwin Wealth Management. In the fall 2007, Ice Financial Income Fund, First Canadian Band, and Brawn Financial Corporation were the potential suitors and they had made offers to acquire the company. Blake Goodwin had to decide whether to sell the company and if he sold it, which buyer was the best one.
He then agreed to the other payments of $250,000.00 and $300,000.00 in a promissory note, which were supposes to be secured. After entering into the stock purchase agreement Mr. Edwards claimed that prior to his purchase, BTI made inaccurate statements to him regarding Riverwood’s "established" sales force, general ledger trial balance, and general ledger reflecting ownership of certain equipment that was owned by third parties. Edward’s brought up the issue with the chief operation officer of BTI, Mr. Daniel Timberlake. When Mr. Timberlake got back with him he did not respond to the letter’s that Timberlake sent to Edward’s, and he did not pay the second payment of $250,000.00 or the last payment of $300,000.00. In 2 July 2003, BTI filed a complaint alleging breach of the stock purchase agreement, default of promissory note, and
The Board also confirms the company’s strategic
Relevant Facts: Nurofen, the pain-relief medication is made by Reckitt Benckiser Australia, a multinational company. The company was found misleading customers for all its specific range that contained the same active ingredient ibuprofen lysine 342mg and was seen to have same effect. The product was advertised the products as been targeting back pain, period pain and tension headaches. The Company was fined $1.7m for misleading customers on range of ‘specific pain’ relief contravening Australian Consumer Law has been brought forward by ACCC. The ACCC had asked federal court to impose $6 million fine.
The financial summary revealed both of the company 's financial is risk is worsening and this is most likely due to the change in consumer preferences to wine, and liquor. Even with the change in consumer preferences Molson Coors is able to pay its obligations when they come due while The Boston Beer Company may be having difficulty paying their obligations when they come due. Molson Coors profitability is growing allowing them to successfully convert their investments into profit and to use shareholders money efficiently. The Boston Beer Company 's profitability is deteriorating causing them to spend shareholders money irrationally. The Boston Beer Company would be an attractive acquisition for Molson Coors because The Boston Beer Company
Their current ratio improved from 1.59 to 2.44 which shows the ability to cover current liabilities has improved. Massachusetts Stove Company strategically made decisions to not only increase their current assets quickly but also managed their liabilities to keep them from growing out of control. This means that the company could cover current liabilities at any time relatively easily with their cash, receivables, or other current assets. In terms of the market, Massachusetts Stove Company does have the demand of 220,000 active prospects they could try to sell stoves too if a dire need arose for quick cash. Management even brought their quick ratio to 1.08.
The View of Perception There are many unmistakable parallels between the two-short story’s “The Lottery” and “Barn Burning.” “The Lottery” is written by Shirley Jackson and takes place in a small town in America. The lottery is an annual ritual where all the families get together, the man of each family takes a paper with the possibility of that being marked which then means someone in the family will die. That is to say, a villager winning the lottery results in the other villagers stoning he or she to death. William Faulkner wrote the short story “Barn Burning.”
J.P. Morgan and Jay Gould had a big responsibility for price skimming taking the upper hand or “area transportation
The company increased its long-term debt from 20 million to over 530 million from 2006 to 2011. This significantly increased its Debt to Equity Ratio from 0.18 to 1.17 over the previous fiver years. The increase in debt also hindered the company's current ratio and interest coverage ratio as time went on. As seen by the debt covenants and the decline in AP days, creditors began to feel uneasy about the amount of debt being taken on by the company. In a relatively short period of time a walnut distributor had taken the snack segment by storm and was poised to make a multi-billion dollar bid for Pringles.
Cost of equity was calculated using the 10 year UST rate, 5.02%, because it is a good measurement of the risk free rate, plus the firm’s beta, 0.56, multiplied by the risk premium, which we concluded to be 5%. This gave Blaine, when unlevered, a WACC of 7.82%. When taking the $40 million debt and $100 million cash buyout of stocks into account, cost of debt is now a factor. Cost of debt was 5.88%, the bond rating of a AAA rated company like we assume Blaine
Their three options include a loan (sweetheart), bonds or an IPO. The firm has expressed interest in the first option (loan). This appears to be a good fit as they have decreased their long-term liabilities from previous years and if they want to expand, extra liquidity will be needed. The firm’s current line of credit is about double what it normally is and the payments on their remaining long-term debts are going to increase through the next four years with a balloon payment due in 2015 of $642,000. The increased current line of credit is due to the recently added production lines and only carries a 4% interest rate.
Ocean Manufacturing, Inc. intends to go public in the next couple of years which could result in the company being an even bigger and more profitable client. Once the company goes public, it will also increase Barnes and Fisher, LLP’s risk because third parties will rely on audited financial statements.
SNC was able to increase its total firm value by $1,834,000 and its total equity value by $1,581,000, in 2012 dollars. On average, this attributed to an increase of approximately $203,778 a year in firm value. After a complete analysis of the company, SNC has proven and established itself as a trustworthy company, and it is expected that the market will reward SNC with lower risk. From 2010-2021, the equity multiplier decreased about four times from an average of 3.65 to an average of 1.10. The risks associated with taking on debt are mitigated due to SNC’s decreased leverage.
CHAPTER TWO LITERATURE REVIEW AND THEORETICAL FRAMEWORK 2.1 INTRODUCTION: Newspaper firms have started to search for online delivery channels so as to retain the young readers. As a result, they have transferred a considerable amount of their delivery channels from print to online format. Most of the media firms have started to implement a 360-degree strategy that integrates content decisions “shaped by the potential to generate consumer value and returns through multiple platforms of expression of that content via a number of distribution outlets” (Doyle, 2010).