Introduction The William Wrigley Jr. Company is the largest manufacturer and distributor of chewing gum‚ with a well consolidated market position. Due to new products and foreign expansion‚ its previous revenues have grown at an annual rate of 10% and its stock price regularly outperforms the S&P 500 as well the industry index. It is a conservatively financed firm with total assets of $1.76 billion and zero debt as of 2001. The purpose of this case study revolves around how should they use a $3
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The Wm. Wrigley Jr. Company: capital structure‚ valuation‚ and cost of capital Teaching Note Synopsis In June 2002‚ a managing director of an active-investor hedge fund was considering the possible gains from increasing the debt capitalization of the Wm. Wrigley Jr. Company. Wrigley had been conservatively financed and at the date of the case‚ carried no debt. The tasks for the student are to: Estimate the potential change in value from relevering Wrigley using adjusted present value analysis
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the use of debt financing. Upon closer inspection‚ I have noticed that your company uses no debt at all. As an experienced hedge fund manager‚ I am concerned that your management is missing valuable opportunities by excluding debt from your capital structure. My partner‚ Susan Chandler‚ and I have done extensive research on how undergoing a capital reconstruction process can benefit you in the long run. If your company decides to recapitalize‚ there are a few ways in which the debt can be used in
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WACC before recapitalization Wrigley’s prerecapitalization WACC is 10.9%. The cost of equity assumes a risk-free rate of 5.65% for 20-year U.S. Treasuries (case Exhibit 7)‚ a risk premium is assumed 7% (or 5%)‚ and uses Wrigley’s current beta of 0.75 (case Exhibit 5). 4. WACC after recapitalization The increase in leverage will affect Wrigley’s WACC in at least three ways: 1. Cost of debt: Wrigley’s debt rating will change from AAA (consistent with no debt) to a BB/B rating reflecting
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and the wacc might be if wrigley pursued this capital structure change. The projected cost of debt would depend on her assessement of wrigley’s debt rating after recapitalization and on current capital market rates. WACC before recapitalization Wrigley’s pre recapitalization WACC is 10.9%‚ the cost of equity assumes a risk free rate of 5.65% for 20 years US treasuries in the case exhibit 7; a risk premium is assumed 7% (or 5%)‚ and uses Wrigley’s current beta of 0.75 (case Exhibit 5). 4. WACC
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The aim of this experiment was to determine the effect of music and age on STM (WM). The results of the experiment were confirming the hypothesis to some extent. The hypothesis was that the older the subject conducting the experiment is‚ the higher the cognitive performance‚ which will result in a higher level in completing the task. Also the subjects will be distracted when the music is played. However‚ some of the results did not match the hypothesis; such as Group2 (Year 9 Newman) that completed
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Case 34 Lorex Pharmaceuticals Elaina Wesel MANA 6302 N1 Abstract This report will seek to outline and discuss the challenges faced by Lorex Pharmaceuticals. This report will detail the circumstances that dictated the challenge faced Lorex Pharmaceuticals‚ as well as the key areas they must consider when attempting to resolve this challenge. The report will examine the possible outcomes‚ and make a final recommendation based on the information provided. When developing a brand new product
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From Wrigley Field to Yankee Stadium A mighty and triumphant roar radiates from the throats of the thousands upon thousands of people packed into the stands like sardines. Tears of joy stream down the faces of grown men as the team they have loved since they could first walk has just won the World Series. The sport of baseball has grown to become the national pastime of the United States since Abner Doubleday first invented it in 1839. From 1839 to the present‚ many things have changed about the
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Shlensky vs. Wrigley The case is about a stockholder named Shlensky who is suing the board of directors of Wrigley Field on the grounds of failure to install lights at the stadium. This is a claim of mismanagement and negligence by the directors. At the time of the case‚ The Chicago Cubs were the only major league team without lights on their stadium. Mr. Wrigley‚ the principal owner of the team‚ refused to add lights onto the stadium because he felt that‚ "baseball is a daytime sport and it would
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Both Louise Tilley (Tilly‚ et al.‚ 1992) and Wrigley (Wrigley‚ 1978) argued that this effect of mass child foundling and abandonment was a form of “social distribution of children in Medieval Europe” where houses with extra children distributed them to those with deficiency in an effort to balance the economics of the time ‚ this is however from an economical modelling and has nothing to do with family decision making. Boswell (Boswell‚ 1988) also asserts that children were redistributed in the
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