... additional new common shares or a combination of cash and new share. Based on the following analysis, Ford should go ahead with Value Enhancement Plan. Characteristic of VEP The Value Enhancement Plan has the feature of stock split and share repurchase. Exchanging existing shares for new shares on a oneforone basis, shareholders are also offered the option to reinvest $20 to receive additional new Ford common shares. In this sense, share price would decrease while the number of shares outstanding is going to increase. According to Ford's announcement mentioned in the case, shareholders choosing the share option would receive 0.748 new Ford common shares in lieu of $20 cash. So, the effect is similar to 1.748 for 1 stock split. However, not all the shareholders prefer share option. For those who elect cash option, they would receive $20 as though they sell part of their shares, which reflects the feature of share repurchase. Advantages of VEP With the combined feature of stock split and share repurchase, VEP has its strength. In terms of cash option, since there is no good things to do with the massive cash reserve, returning the excessive cash allows shareholders to make profitable investment by themselves. Unlike cash dividend, returned cash is taxed as capital gains, so it generates tax efficiency for shareholders. In addition, though the price of new Ford shares would decrease, shareholders will not bear any loss, because the reduced price is offset by the cash they receive...
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...company, the majority of shareholders and its other constituencies, such as employees, suppliers and the communities in which it operates. Among the biggest losers in this deal is the Ford family, which took its $1.4 billion of proceeds in stock. The paper loss on those shares now approaches $1 billion. Since the deal closed Aug. 2, 2000, Ford stock has fallen from about $27 a share (adjusted for the transaction) to Friday's $8.27. If you had 100 shares and took the cash, you've got $2,000 plus 100 shares now worth $827. Your total: $2,827. If you took the stock, you've got little more than half that much: 175 shares now worth $1,447. Look, I'm not saying that all big stock buybacks or big one-time dividends end up with companies stripping themselves of cash that they later wish they had back. Many of these deals turn out perfectly well. But whenever you see a company in a cyclical and capital-intensive business such as cars doing huge stock buybacks or jacking up its dividend sharply or talking about having more cash than it needs, it's probably a sign that the cycle has peaked. http://www.washingtonpost.com/wp-dyn/content/article/2006/09/04/AR2006090401007.html http://www.fool.com/ddow/2000/ddow000628.htm FORD MOTORS CORP - VALUE ENHANCEMENT PLAN 1. Does Ford have too much cash? • Liquidity Analysis: Quick Ratio and Current Ratio. Find the industry standard and compare! Quick ratio = (current assets – inventories) / current liabilities...
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...Background Ford Motor Company was founded by Henry Ford and 11 investors in 1903. The company is based out of Dearborn, Michigan. Ford Motors is a worldwide company, with 335,000 employees, operating in 25 countries and on six continents. Ford changed the way cars were made with their innovative assembly production methods. Having gone public in 1956, the company grew to become the world’s largest truck manufacturer and the second largest total automotive manufacturer. In addition to manufacturing cars and trucks, they are involved in producing components/systems and are engaged in financing and rentals. Ford experienced significant growth derived from company acquisitions. The acquisitions leading up to 2000 consisted of Hertz Co., Jaguar, Volvo, and Land Rover. Auto industry sales are sensitive to the economic cycle. Echoing this notion, Ford’s sales tend to experience volatility during times of economic recessions and booms. In these turbulent times, the company has a high variability of cash on hand and equity market value. In 1999, Ford had a net income of $7.2 billion (approximate 4.5% profit margin), and revenues of $162.6 billion. Ford’s automotive segment accounts for 85% of total revenue. Their US car and truck sales are responsible for 24.1% of the total market share. As of 2000, Ford had 1.15 billion common shares of stock and 70.9 million shares of Class B stock. Among these two shares, the Ford family held all Class B shares, which gave them special voting...
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...Ford is one of the leading auto-manufactures based in the United States, and competes with other top manufactures on a global stage. However, given its leading market position, it has accumulated a large sum of cash and has not been utilizing it efficiently. I found evidence of this by comparing its Cash Turnover Ratio with that of its two closest competitors: GM and Chrysler (Exhibit 1). The analysis shows that Ford’s Cash turnover ratio is lower than its two competitors, suggesting that not only does Ford have excess cash, but it has not been utilizing it effectively. Ford believes that the excess cash has undervalued its stock as well as descentivizing employees whom otherwise would not feel motivated with its given level of cash. In response to this, Ford has developed a VEP plan which contains the features of a stock-split as well as share repurchase, offering to exchange existing shares on a one-for-one basis and receiving $20, or receiving additional new Ford common shares; a stock split. This will essentially decrease the stock price while increasing the number of shares, with the drop in price being offset by the additional $20. On paper, this provides value, flexibility, and liquidity for shareholders, because unlike returning cash through Dividends, the VEP is designed to return cash as taxed as capital gains, generating value for its shareholders. The repurchase aspect also sends a distinct signal to the market that they believe the stock is undervalued. It also...
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...February 15, 2014 Subject: Ford’s Shareholder Value Enhancement Plan (VEP) Evaluation Ford Motor Company Ford Motor Company is an American automaker, it is the world's fifth largest automaker based on worldwide vehicle sales. Its headquarters are based in Dearborn, Michigan, which is a suburb in Detroit. Henry Ford founded Ford Motor Company on June 16, 1903 and it became one of the largest and most profitable companies in the world, as well as being one of the few to survive the Great Depression. Ford Company is the largest family-controlled company in the world; it has been in continuous family power for over 110 years. Ford now incorporates two brands: Ford and Lincoln. Ford once owned 5 other luxury brands which where were Volvo, Land Rover, Jaguar, Aston Martin and Mercury. But over time those brands were sold to other companies and Mercury was discontinued. Nasser was CEO of Ford Motor Company from 1998 to 2001. Todays CEO is Alan Mulally. Brief Summary of the Article The article talks about how in April 2000, Ford Motor Co. announced a shareholder Value Enhancement Plan (VEP) to recapitalize the company’s ownership structure. Ford had accumulated $23 billion in cash reserves and under the VEP would return as much as $10 billion of this cash to shareholders. For each share currently held, the plan would give stockholders one new share in addition to choosing either $20 in cash or additional new Ford common shares. Shareholders that would choose to receive cash would...
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...FORD MOTORS CORP - VALUE ENHANCEMENT PLAN 1. Does Ford have too much cash? • Liquidity Analysis: Quick Ratio and Current Ratio. Find the industry standard and compare! • Opportunity Cost of holding cash versus Capital Gain for spending that idle cash! • Solvency to understand the risks incurred by the firm and verifies it against an optimal capital structure. • Ford has made past acquisitions and has exhausted that list by purchasing Jaguar Cars, Volvo Cars, and Land Rover. Investment in expansion without a solid reason would prove to be futile. • The availability of cash incentivizes the management to shirk their work and thereby leading to downfall in profits. • Find operating leverage: Debt to Capital ratio! 2. How does VEP work? VEP is one of the powerful strategies applied by the company to make itself intrinsically valuable, Combines stock split and re-purchase. VEP is advantageous to both Shareholders and Company! • The replacement of existing shares of shareholders with new corporations shares on 1:1 ratio • an additional $20 cash as a compensation for reduction in the value of new shares OR option for the shareholders to reinvest the $20 cash to procure additional shares • Advantage is double sided. The company’s dividend pay-out ratio is reduced. • The stockholders would receive the $20 cash taxed at a rate for capital gains and not the marginal tax rate. • Shareholders...
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...Question: FORD MOTOR COMPANY’S VALUE ENHANCEMENT PLAN (VEP) Q1. Vote in Favour or against of Ford Value Enhancement Plan? Vote in favour of ford’s Value enhancement plan for reasons discussed below: 1. Choice to Investor: It clearly gives the choice of investment and possible returns that could be obtained to the investors. They can make the choice for themselves depending future prospect of pay-out that they would prefer. 2. Share Advantage: For example if we take an investor has 100 shares in the company, if he would prefer to receive extra shares instead of a cash pay-out he would now have 174.8 shares in place of the 100 he initially had, an increase of almost 75% of shares owned by him. With the increase in the number of shares an investor owns, even though the share price will fall it gives the investor the advantage of selling a part of their shares for a more profitable investment and still a retain considerable number of the company shares. If the company were to conduct a share repurchase it would take considerable amount of time before all the shares could be bought back as the limit for daily repurchase is set at 25% of their volume. It could take up to almost a year by the time ford can repurchase the shares for $10 billion. So VEP adds value as they provide an option where they can repurchase a lesser percentage of their shares. 3. Pay-out Advantage: For an investor who would prefer to receive cash pay-out in place of receiving more shares, with the VEP he would...
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...Case Study: Ford Motor Company’s VEP Question 1 Go ahead with the Value Enhancement Plan The feature of having both cash and new share options makes the VEP have its strengths and makes an excellence choice for Ford Motor Company. The cash option solves the problem of Ford having massive amounts of extra cash. Since Ford has no profitable activities for the extensive amounts of cash, returning the excess cash to shareholders allows them to make profitable investments. Different from a cash dividend, the returned cash will be taxed as capital gain and therefore achieves tax efficiency for the shareholders. When looking at the company’s point of view, they are able to lower the dividend payment because there will be an increase in number of shares. This would result in the dividend amount per share to most likely decrease and the total amount allocated to a dividend payment to stay constant. This will make dividends for the new Ford shares to go down because share price falls. Those who elect the $20 cash payout will maintain ownership of the same amount of shares they previously owned, therefore, the total dividend payment then becomes reduced. As a result of the cash payout, the number of new shares outstanding will reduce, this increases the earnings per share and, because of the increased rarity of shares, the overall demand for Ford's shares will increase. With higher demand in shares, comes a higher share price in the future. The stock option satisfies the shareholders...
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...PEROLD On April 14, 2000, Ford Motor Co. announced a shareholder Value Enhancement Plan (VEP) to significantly recapitalize the firm’s ownership structure. Ford had accumulated $23 billion in cash reserves, close to the company’s largest ever cash position and significant relative to Ford’s $57 billion equity market capitalization. Under the VEP, Ford would return as much as $10 billion of this cash to shareholders. In exchange for each share currently held, the plan would give stockholders one new share plus the choice of receiving $20 either in cash or additional new Ford common shares. Ford also announced that it would distribute ownership of its Visteon Corp. parts unit to shareholders. Ford’s share price had performed poorly over the previous year (Exhibit 1), and the proposal drew a positive reaction from analysts who had been urging the company for months to distribute cash to stockholders. Some hailed the VEP as the boldest step yet by Ford Chairman William Clay Ford Jr. and Chief Executive Officer Jacques Nasser to convince investors that they were undervaluing the world’s No. 2 automaker. However, the plan raised a number of questions for investors. Why was Ford proposing this transaction instead of a traditional share repurchase or a cash dividend? How did the interests of the Ford family factor into this decision, and what did the transaction imply about the future involvement of the family in the company? Why was Ford distributing such a significant...
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...SUFFOLK UNIVERSITY SCHOOL OF MANAGEMENT Graduate Programs in Finance Fall Quarter, 2011 FIN MF 820 Financial Policy Thursdays: 7:15-9:55 Instructor: Dr. Shahriar Khaksari, CFA Office: S432 Phone: 573-8366 Email: skhaksari@suffolk.edu The New Corporate Finance: Where Theory Meets Practice Mcgraw-Hill Series in Advanced Topics in Finance and Accounting Course Objective This course is designed to allow students to develop a deep understanding of financial theories, techniques, and models applied to the study of corporate financial decisions. It covers aspects of corporate strategy, industry structure, and the functioning of capital markets. The course consists of three segments. In the first segment, students do a comprehensive analysis of the assigned cases and prepare a written report that includes identification of major issues, alternative approaches, analysis of each alternative, and a concluding part in which students take a clear cut position in how they would approach the problem as a decision maker and defending their position. The Case study is done by groups (three to four students per group). The text analysis should not exceed five pages. It should be typed and double-spaced. A lengthy summary of the case is unnecessary and redundant. The space constraint should discipline students to be concise at differentiating major issues from the less important ones. All the tables, graphs and related...
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...Quotes from Famous Directors about the Role of Music in Films Woody Allen (Annie Hall, Manhattan) "Too broad a question. Let's just say it covers a multitude of sins." Olivier Assayas (Irma Vep, Demonlover) "Usually I'm happy when the score doesn't spoil the film. Redundant music can absolutely put to pieces the work of actors.” Patrice Chéreau (La Reine Margot, Intimacy) "A film without music is one-legged. And I would prefer not to make cinema rather than return to an age without cinematic music." Francis Ford Coppola (The Godfather, The Conversation) "Music is a big factor in helping the illusion of the film come to life. The same way music brings back different periods of our lives." Roger Corman (The Little Shop of Horrors, The Trip) "Music best enhances a film when it evokes and modulates a specific emotional response in the audience to the unfolding story without the audience being aware of it. In Hollywood today, however, this can be difficult to achieve because very often music has to compete with louder and louder sound effects. As a consequence, there is a tendency for the music to oversimplify and overstate its themes. The manipulation of emotion in the audience has probably become cruder, generally speaking." Alex Cox "I don't think it does anymore, music is overused and someone should do a film without any music at all." Cameron Crowe (Jerry Maguire, Almost Famous) "The best soundtrack music by-passes your mind and goes straight to your soul. It sort of trips...
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...Leadership Development Program 2001/2002 Student Portal Project May 22, 2002 Cecille Cabacungan, Goldman School of Public Policy Lesley Clark, Center for Organizational Effectiveness Rachelle Feldman, Financial Aid Office Paula Flamm, University Health Services Gail Ford, The Library Kati Markowitz, Neuroscience Institute Stacey Shulman, Department of Chemical Engineering Dan Sullivan, Haas School of Business Imagine a single Website personalized to meet all your cyberneeds – one that would keep you up-to-date on campus events and academic information and would be accessible from any computer. -- The Daily Californian, April 15, 2002 Table of Contents Executive Summary Main Report I. Charge and Methodology II. Findings III. Portal Development, Current Practices IV. Costs and Phased Implementation V. Conclusions and Recommendations; Criteria for Measuring Portal Success VI. Three Portal Interface Options for Look and Feel; Criteria for Evaluating Options VII. Portal Names Appendices Introduction, Charge, and Methodology Appendix I – Definitions Appendix II – Respondents Appendix III – Student Survey Instrument Appendix IV – Staff, Faculty, Administrator One-on-One Interview Questions Appendix V – Staff Focus Group Questions Appendix VI – Staff, Faculty, and Administrator Survey Instrument Appendix VII – Portal Developer Questionnaire UCB Student Response Appendix VIII – Undergraduate Affairs Focus Groups, Raw Data, 2001 Appendix...
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...AIDS LEGAL Network Q A Publication of the AIDS Legal Network • September/November 2008 Patrick Eba One size punishes all… A critical appraisal of the criminalisation of HIV transmission Lauded by lawmakers as an expression of their strong will to ‘fight AIDS’, HIV-specific laws have become a ubiquitous feature of the legal response to HIV in sub-Saharan Africa1 As of 1st December 2008, twenty countries in ECOWAS Parliament, the West African Health Organisation sub-Saharan Africa had adopted HIV-specific laws.2 (WAHO), the Center for Studies and Research on HIV-specific laws or ‘omnibus HIV laws’, as they are Population for Development (CERPOD), the Network of sometimes ironically referred to, are legislative provisions Parliamentarians in Chad for Population and Development that regulate, in a single document, several aspects of HIV and the USAID West African Regional Programme.3 and The stated objective of these HIV-specific laws, as communication; HIV testing, prevention treatment, care provided under several of their preambulary provisions, and support; HIV-related research; and the protection of is to and AIDS, including HIV-related education people living with HIV. The emergence of HIV-specific …ensure that every person living with HIV or laws in sub-Saharan Africa can be traced to the adoption presumed to be living with HIV enjoys the full of the Model Law on STI/HIV/AIDS for West...
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