Case Study: Debt Policy at UST Inc. UST Inc. is the leading producer of moist smokeless tobacco products which manage by using the conservative debt policy and high dividend payout. Since the firm has faced the decline of the growth from year 1993, the company decided to make the recapitalization by borrowing $1 billion to repurchase their stock in order to maximize the company’s value. By borrowing, interest charged on loan is tax-deductible which the firm can benefit from tax
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[pic] Many fleet cars were bought with an option to sell them back to the manufacturer. Such vehicles were called “program cars”, as distinct from “risky cars” which were not covered by a put option. Roughly 85 % of Hertz’ domestic fleet and 74 % of its international fleet were program cars. Program cars will become more expensive in the future due to the fact that Ford and GM adopted new market strategies that deemphasized lower-margin sales of program cars Risk cars exposed the company to residual
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MINI CASE #1 Issue Identified How to account for the expected loss resulted from redemption of the debt obligations in the period that it announces its intent to call the debt for redemption? ASC References ASC 470-50-40-2 states that “ a difference between the reacquisition price of debt and the net carrying amount of the extinguished debt shall be recognized currently in income of the period of extinguishment as losses or gains and identified as a separate item.Gains and losses shall not
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Dell talking with private equity firms and exploring obtaining bank financing. It's unclear how long it will take to reach a completed deal, though reports have suggested it may take nearly two months. But a leveraged buyout of a company as big as Dell would be no small feat, and it would be dependent on overcoming hurdles specific to the private equity industry and the company itself. As of Friday, before Bloomberg News reported the discussions with private equity, the company was valued at
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Assignment Case: “Cartwright Lumber Co.” HBS Case #9-204-126, Rev 3/04. Main Question: As Mr. Cartwright’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? • He should take the LOC and use trade discounts o Satisfies fund requirement o No collateral o More flexible trade credit limit Additional Questions: 1. Why does Mr. Cartwright have to borrow so much money to support his profitable
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will produce and sell finished tennis balls. In the language of finance, you make an investment in assets such as inventory, machinery, land, and labor. The amount of cash you invest in assets must be matched by an equal amount of cash raised by financing. When you begin to sell tennis balls, your firm will generate cash. This is the basis of value creation. The purpose of the firm is to create value for you, the owner. The firm must generate more cash flow than it uses. The value is reflected in
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Proprietorship: a business owned by one individual (greatest in number of the forms) Advantages: Easiest to start, least regulated, single owner gets all profits, taxed as personal income Disadvantages: Limited to life of owner, equity capital limited to owner’s personal wealth, unlimited liability, difficult to sell ownership interest Partnership: Similar to sole proprietorship, except the business has more than one owner. Advantages: more capital available and relatively
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Introduction Urban Outfitters, Inc.(URBN) is a lifestyle retail company, which operates retail clothing stores. It operates through two reportable business segments: Retail and Wholesale. The Retail segment consists of Urban Outfitters, Anthropologie, Free People, Terrain, Leifsdottir and BHLDN brands, whose merchandise is sold directly through stores, catalogs, call centers and web sites. The Wholesale segment consists of Free People division. It designs, develops and markets young women's contemporary
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Long-term Finance and Economic Growth Working Group on Long-term Finance The views expressed in this report are those of the Working Group on Long-term Finance and do not necessarily represent the views of the individual members of the Group of Thirty. ISBN 1-56708-160-6 Copies of this paper are available for $49 from: The Group of Thirty 1726 M Street, N.W., Suite 200 Washington, D.C. 20036 Tel.: (202) 331-2472 E-mail: info@group30.org; www.group30.org Long-term Finance and Economic Growth
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Bonds are a form of long term debt financing in which an organization issues a bond to raise capital. When a bond is issued the organization is in actuality taking a loan at an interest rate referred to as a coupon which it typically pays on an annual or semiannual basis. The bond then has a maturity date at which time the organization pays back the principal to whoever is holding the bond. For a health care organization who wishes to issue a bond they must typically go through a series of six
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