1 Introduction The main issues in this case relates to a mature firm that does not use debt at all and is not taking advantage of the lowest interest rates in nearly 50 years. William Wrigley Jr. Company makes chewing gum, has a leading market share in their line of business, and yet has no debt. Blanka Dobrynin, a managing partner of Aurora Borealis LLC, wants to see if Wrigley Company can take advantage of and benefit from debt. 2 Problem Statement Wrigley does not have any debt issued and is not taking advantage of the lowest interest rates in the last 50 years. An outsider Blanka Dobrynin, managing partner of Aurora Borealis LLC, wants to know what would happen if Wrigley could borrow $3 billion at a credit rating between BB and B. 3 …show more content…
They can either issue debt, or keep everything the same and have no debt. If they do not issue debt, nothing changes and they still hold their position as the world's largest manufacturer and distributor of chewing gum. However, one of the major advantages of issuing debt is that their income tax decreases since their interest expense increases. The main disadvantage for issuing debt is that Wrigley would have to repay the loan plus any interest. If Wrigley decided to issue debt, they could either pay dividends or repurchase shares. The main advantage of paying dividends is to keep the interest of the shareholders' in the company's stock. On the other hand, the advantage of buying back shares would be for the Wrigley family to hold more control over the company. Also, buying back shares reduces the balance sheets assets and total liabilities and stockholders' equity. 5 Recommendations I recommend that Wrigley does take the $3 billion of debt. Whether the $3 billion was used to pay dividends or repurchase shares, both have an effect on the market equity. Both paying dividends and repurchasing shares reduces Wrigley's equity. By doing so, this lowers the investment risk the company. Blanka Dobrynin should try to convince the directors to undertake capitalization. Borrowing the $3 billion would benefit Wrigley as it lowers the cost of capital, and reduces the investment
Econ 3460: Salary Arbitration Report Jeff Samardzija v. Chicago Cubs Jeff Samardzija Offer: $6.2 million Chicago Cubs Offer: $4.4 million Midpoint: $5.3 million Submitted by Group 10 (Ryan Collins, Justin Harris, Eun Jun Robert Lee, Robert Attia, Aaroosh Kohli) December 4, 2014 TABLE OF CONTENTS Introduction and Request for Hearing… ………………………………....................... 1 Quality of the Player’s Contribution During the Past Season………………………. Length and Consistency of Career Contributions………………………. Existence of Physical or Mental Defects………………………….. Past Compensation…………………………………………...
The American sub-prime mortgage crisis and asset-backed commercial paper (ABCP) crisis happened in Canada had huge negative impacts on the financial industry. With the bankruptcy of several major banks in North America, investors lost their faith in financial institutions and were not willing to invest their assets to those financial institutions because of extremely high risks. As a competitive player in the industry, Goodwin also faced this threat and had poor performance. Internal Analysis Strength: Goodwin was a well-diversified company with six divisions in different but related market segments.
The Chicago Bears have over $71 million of cap space when they release Jay Cutler. According to spotrac.com, the Bears could save $14 million if they liberate Cutler. This present that the Chicago
Jerry Useem is a talented writer who has covered business and economics for The New York Times, Fortune, and other publications. Useems intended audience to read his article “The Curse of the Loyal Sports Fan” are sports fans and people who may buy into some superstitious beliefs about the Cubs’ terrible record. My whole life I’ve been a big baseball fan, and my mom is a loyal Cubs fan, so I wanted to know more about the team. Useem informs us of the background of the Cubs’ organization and about their lack of success. The Cubs have not won a World Series since 1908, and the fans believe they are cursed: Either by a billy goat, a black cat, a fan whose name we shall not speak of, or just plain bad luck.
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
1) What is Dollarama’s largest current asset? Elaborate on what this has to do with their operations. Dollarama’s largest current asset is merchandise inventory. Current assets are items owned by an entity can be converted into cash within one year. Merchandise inventory is an extremely important part of this company as it is intended for sale to its customers.
Verizon purchase a higher number of common stocks that increase the retained earning but decreased the cash. Because they purchased stocks, their net borrowings
Was this the right choice for the government? General Motor’s debt was converted into preferred and common stock that was owned by the government. The stocks were then offered to the public (Contorno, 2015). General Motors’ bailout cost taxpayers more than $11.2 billion; this included a $826-million write-off in March from government investments in the “Old GM” before the company’s bankruptcy
Argumentative Paper : Athletes Are Overpaid Did you know that the highest paid Cubs player will make 19 million dollars, the average pay is 6 million dollars, and the lowest is $417,000. Even the lowest pay is pretty high. Athletes are being paid a ton of money,and it’s getting to be too much.
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.
1. Define acronyms CRP, EDI, OSB, ECR and explain. CRP stands for "continuous replenishment program". CRP was a process that P&G created in order to increase logistic efficiency. The process consisted of using electronic data interchange (EDI), which is an electronic system that transmits data instantaneously from one business to another.
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.
POCKETING THE GREENS CASE STUDY 1. Immediate Issue(s) or Problem(s) In Pocketing the Greens case, Cheap Pharma Inc. (CPI), a pharmaceutical company specializing in generic drugs sued Mr. De Guzman and two other members of the Board of Directors (BOD) for profiting from the transaction they made with CPI’s competitor and potential business partner named Green Med (GM). The CPI’s shareholders are demanding Mr. De Guzman as well as the two other members of BOD to render an accounting and return whatever profits they made from their transaction with GM to CPI. Is CPI in the right position to do this?
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%.