Finance Case Study Essay Example
INSTRUCTOR: Mr. Konstantinos Kanellopoulos, MSc (L.S.E.), M.B.A.
COURSE: MBA-680-50-SUIII12 Corporate Financial Theory
SEMESTER: Summer Session III
Case Study
The Many Different Kinds of Debt
(solutions)
Konstantinos Kanellopoulos 22nd August 2012
CASE STUDY ON The many different kinds of debt
It was one of Morse’s most puzzling cases. That morning Rupert Thorndike, the autocratic CEO of Thorndike Oil, was found dead in a pool of blood on his bedroom floor. He had been shot through the head, but the door and windows were bolted on the inside and there was no sign of the murder weapon.
Morse looked in vain for clues in Thorndike’s office. He had to take another tack. He decided to investigate the financial circumstances surrounding Thorndike’s demise. The company’s capital structure was as follows:
• 5% debentures: $250 million face value. The bonds matured in 10 years and offered a yield of 12%. • Stock: 30 million shares, which closed at $9 a share the day before the murder.
Yesterday Thorndike had flatly rejected an offer by T. Spoone Dickens to buy all of the common stock for $10 a share. With Thorndike out of the way, it appeared that Dickens’s offer would be accepted, mush to the profit of Thorndike Oil’s other shareholders[1].
Thorndike’s two nieces, Doris and Patsy, and his nephew John all had substantial investments in Thorndike Oil and had bitterly disagreed with Thorndike’s dismissal of Dickens’s offer. Their stakes are shown in the following table:
| |5% Debentures (Face Value) |Shares of Stock |
|Doris |$4 million |1.2 million |
|John |0 |0.5
COURSE: MBA-680-50-SUIII12 Corporate Financial Theory
SEMESTER: Summer Session III
Case Study
The Many Different Kinds of Debt
(solutions)
Konstantinos Kanellopoulos 22nd August 2012
CASE STUDY ON The many different kinds of debt
It was one of Morse’s most puzzling cases. That morning Rupert Thorndike, the autocratic CEO of Thorndike Oil, was found dead in a pool of blood on his bedroom floor. He had been shot through the head, but the door and windows were bolted on the inside and there was no sign of the murder weapon.
Morse looked in vain for clues in Thorndike’s office. He had to take another tack. He decided to investigate the financial circumstances surrounding Thorndike’s demise. The company’s capital structure was as follows:
• 5% debentures: $250 million face value. The bonds matured in 10 years and offered a yield of 12%. • Stock: 30 million shares, which closed at $9 a share the day before the murder.
Yesterday Thorndike had flatly rejected an offer by T. Spoone Dickens to buy all of the common stock for $10 a share. With Thorndike out of the way, it appeared that Dickens’s offer would be accepted, mush to the profit of Thorndike Oil’s other shareholders[1].
Thorndike’s two nieces, Doris and Patsy, and his nephew John all had substantial investments in Thorndike Oil and had bitterly disagreed with Thorndike’s dismissal of Dickens’s offer. Their stakes are shown in the following table:
| |5% Debentures (Face Value) |Shares of Stock |
|Doris |$4 million |1.2 million |
|John |0 |0.5