Owens Corning Fiberglass

Another option is the issuing of preferred stock, the company’s common stock is already overvalued in the market; therefore, sourcing additional capital through common stock might result to lower proceeds.

c. SDI’s officers have been under pressure from the board of directors to do something to improve the price of the common stock. Management is also concerned about the stock price personally because bonuses are based on the performance of SDI’s stock price relative to other firms in its industry. So, they would like a detailed explanation of how the market price is determined—what do investors look for, and what can management do to provide what investors want? Bob Wilkes also wants you to explain how stock valuation information be used to help estimate the company’s cost of equity. Tony Biddle provided some information that can be used in the stock valuation process. First, as background on what investors think about the company, here are some representative quotations taken from analysts’ reports issued during the past few years.

For cash compensation package, tax consideration also decreases the value. Cash bonus is taxed at ordinary tax rate, so Ms. Jameson receive $5000 x (1-0.28) = $3,600 today, and $4,450.82[5] at the next five years. However, there is a risk that Ms. Jameson’s marginal tax rate is changed. For the worst case, tax rate might reach as high as 31%, and this results in the value of $4,265.37[6] at the end of the fifth year.

The final option was raising capital in debt markets. Because of its current leverage KTM would only receive short term financing from banks and the management was thus rather considering the bond market opportunity.

Our estimated cost of capital, 20.81%, is lower than Ricketts’ expected return, 30%-50%, thus the investment is worthy. However, it’s higher than other pessimistic members’ expected return, 10%-15%, making the decision more complex and requiring further valuation。

Spartan Plastic LimitedCase StudyProblem Statement:Spartan Plastics Canada Limited is a subsidiary of Spartan International U.S.A. Spartan manufactured extruded plastic parts. Mr. David Angove was the vice-president of the company. It is a small company with only 50 employees, the company manufacturing process is complex, since the company had been improved the manufacturing process from the original to modified, there are still many problems appearing in the company.

Aside from the two aforementioned proposals the company can raise its leverage in other ways. By conducting DuPont analysis and understanding operating leverage we see that purchasing fixed assets and decreasing stockholder’s equity will raise the equity multiplier and the firm’s operating leverage. In this instance we recommend against this approach as the firm already has a large amount of excess cash above what they require to fund new positive NPV projects and purchase new assets. Investors would rather see their capital returned to them in the form of share repurchases and dividends as it is evident by the company’s cash stockpile that they can

addition, the company has an applicable tax rate of 40% and no unused tax loss or credit carryforwards.

The mixture of debt-equity mix is important so as to maximize the stock price of the Costco. However, it will be significant to consider the Weighted Average Cost of Capital (WACC) as well so that it can evaluate the company targeted capital structure. Cost of capital (OC) may be used by the companies as for long term decision making, so industries that faced to take the important of Cost of capital seriously may not make the right choice by choosing the right project(Gitman’s, ).

The 50% premium can be explained by the valuation of the firm based purely on its projected future cash flows and assumed growth rate (value = $391.58 million) plus the added value that the ITS can provide (value = $114.2 million) when the leveraged buyout is completed. There are two components to the ITS or income tax shield –

3. What restructuring option – Icahn’s spin-off proposal or the company’s targeted stock proposal – will create the most value for shareholders? For creditors? For the firm’s other stakeholders?

Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporary heavy workloads. Your employer is also considering the purchase of a Biggerstaff & Biggerstaff (B&B), a privately held company owned by two brothers, each with 5 million shares of stock. B&B currently has free cash flow of $24 million, which is expected to grow at a constant rate of 5%. B&B’s financial statements report marketable securities of $100 million, debt of $200 million, and preferred stock of $50 million.

Referring to Vice President of Finance, he want to pursue the current approach because they are in profitable based on contribution margin by 35 percent. The company just needs to monitor their margin in control their cost well.

2. Evaluate the two offers in Exhibit 7. What explains the two structures? In each case, what is the value to MCI shareholders?

The previous 959.6m Amoco shares will convert into 633.336m shares of BP ADS equivalent, with the previous 965.6m ADS shares, BP shareholders will take part 60% of the new company, still have majority control over the firm. In this deal, we paid for about 20% premium, which is quite standard and normal. Because synergies from revenue and chemical divisions’ combination are not estimated nor not expected to bring benefit, the main synergy from the merge is 2 billion dollars saving of pretax operating cost. The value we create for our shareholders is $14,840.06 million (Amoco stand-alone value $46,430 million+ synergy $2 billion – price paid for Amoco $33,538.94). But this number is quite sensitive to a lot of factors, such as future energy demand, oil and gas price, industry growth potentials, ultimately affecting Amoco’s stand-alone and synergy valuation. Please