Fi 516 Mini Case

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FIN-516 – WEEK 2 – MINI – CASE ASSIGNMENT
1. What is the name of the company? What is the industry sector? General Electric Industrial Goods
2. What are the operating risks of the company?

3. What is the financial risk of the company (the LT debt to total capitalization ratio)? Debt to equity = Total debt ÷ GE shareowners’ equity
= 11,589 ÷ 116,438 = 0.10
4. Does the company have any preferred stock? (shares/book value/market price and value) GE does not have any preferred stock outstanding that is available to the public. 5. What is the capital structure of the company?: Short term portion of Long Term Debt, Long Term Debt, Preferred Stock (if any), and market value of Common Stock issued and outstanding? (Provide table with dollar value for each component, total, and percentage for each; sum par and a pic for common and preferred; if there are multiple classes of common--present $/% for each, and total for common stock. Provide both book value and estimate of market value (for debt assume book and market value is same, for equity base market value on stock price and shares outstanding) Liabilities Dec 31 2010 Current Liabilities

Accounts Payable 58,373,000 Short/Current Long Term Debt 166,869,000
Other Current Liabilities 59,891,000 Total Current Liabilities 285,133,000 Long Term Debt 243,459,000 Other Liabilities 70,647,000 Deferred Long Term Liability Charges (131,000)

Minority Interest 1,696,000 Negative Goodwill - Total Liabilities 600,804,000

Stockholders' Equity
Misc Stocks Options Warrants -
Redeemable Preferred Stock -
Preferred Stock - Common Stock 702,000
Retained Earnings 137,786,000
Treasury Stock (31,769,000)
Capital Surplus -
Other Stockholder Equity 9,719,000
Total Stockholder Equity 116,438,000
Net Tangible Assets 31,745,000
Shares Outstanding 10.56B
Book Value Per Share 11.38
6. What is the company’s current actual Beta? (most recent published---note source, publication date and period over which Beta is calculated - if available) Beta:1.46
http://finance.yahoo.com/q/pr?s=GE
7. What would the Beta of this company be if it had no Long Term Debt in its capital structure? (Apply the Hamada Formula; provide formula, data inputs and product.)
1.46
1+(1-.388)*(.10) =1.37
8.What is the company’s current Marginal Tax Rate? (Provide source, rate. As a reference, calculate effective rate based on most recent annual report- Income Statement) We believe that the GE effective tax rate is best analyzed in relation to GE earnings before income taxes excluding the GECS net earnings from continuing operations, as GE tax expense does not include taxes on GECS earnings. GE pre-tax earnings from continuing operations, excluding GECS earnings from continuing operations, were $12.6 billion,. On this basis, GE’s effective tax rate was 38.3% in 2011. http://www.ge.com/ar2011/pdf/GE_AR11_SupplementalInfo.pdf

8.What is the Cost of Debt, before and after taxes? (quote current yield on bonds---identifying source and date of source, also compare to interest expense and effective tax rate as indicated on most recent Income Statement, For WACC, indicate which rate you are using for rd (effective or marginal can be used for purposes of this assignment) After-tax cost of debt calculations:

For Before tax cost of debt calculations:
Year2010 2009...
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