Question 5: Evaluate the Put-Warrant/Convertible Bond proposal. Does it solve Intel’s capital structure dilemma? What arguments might be made in favor of it? Intel’s capital structure dilemma was that it was holding too much cash on hand. Eventually‚ there were three available strategies or alternatives that Intel could undertake in terms of cash disbursement policies. First‚ it could continue or expand its market-repurchase program. Secondly‚ Intel could declare dividends to its shareholders
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I s there a way of dividing a company’s capital base between debt and equity that can be expected to maximize fi rm value? And‚ if so‚ what are the critical factors in determining the target leverage ratio for a given company? Although corporate fi nance has been taught in business schools for more than a century‚ the academic fi nance profession has found it diffi cult to come up with defi nitive answers to these questions. Part of the diffi culty stems from how the discipline has evolved
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of Diageo‚ the treasury team was given the task of establishing the cost of capital for each of the different areas the company operated. The team had to create a simulation model which should consider new finance approaches‚ treasury functions to focus on‚ what the firm’s risk footprints will be‚ how to calculate cost of capital and finally how to optimally structure capital. How has Diageo managed its capital structure? Both Grand Metropolitan and Guinness had little debt prior to the merger‚
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Kale et al (1991) suggests that the level of risk is one of the main determinants of a firm`s capital structure. By looking at the trade off theory we might expect a negative association when risk and leverage are concerned. If firms have high earnings volatility‚ for some obvious reasons‚ they would not want to indulge in debt financing. It follows that when firms are exposed to bankruptcy and agency costs greater is the incentive to reduce the level of debt otherwise the more volatile a firm`s
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Capital Structure Decisions: Which Factors are Reliably Important? Murray Z. Frank1 and Vidhan K. Goyal2 First draft: March 14‚ 2003. Current draft: December 20‚ 2003. ABSTRACT This paper examines the relative importance of 38 factors in the leverage decisions of publicly traded U.S. firms from 1950 to 2000. The most reliable factors are median industry leverage (+ effect on leverage)‚ market-to-book ratio (-)‚ collateral (+)‚ bankruptcy risk as measured by Altman’s Z-Score (-)‚ dividend-paying
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Capital Structure and Profit Capital Structure Definition A unite of a company’s long-term debt‚ specific short-term debt‚ common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. Debt comes in the form of bond issues or long-term notes payable‚ whereas equity is classified as common stock‚ preferred stock or retained earnings. Also‚ Short-term debt such as working capital requirements is considered
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Capital Structure Practice Problems 1. Hayfin Enterprises has the following operating results and capital structure: Hayfin Enterprises ($000s) | | | Financial Data | | Revenue | $ 6‚000 | Operating Expenses | $ (4‚500) | EBIT (Operating Profit) | $ 1‚500 | | | Debt | $ 1‚200 | Equity | $ 8‚800 | Total Capital | $ 10‚000 | Interest rate on debt = 9% Share price = $25 (MV = BV) The firm is contemplating
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Recommendations Literature Review (a) Telecommunications Sector Background (b) About Bharti Airtel Ltd. (c) Statistics (d) Bharti Airtel Ltd. Organization Structure (e) Worldwide Presence (f) Services (g) Subscriber Base (h) One Network (i) Timeline Conclusion Appendix 7 21 22 23 8. 9. 36 37 1 Acknowledgement I express my sincere gratitude to my mentor Mr. Chetan Nangia- Bharti Airtel Ltd.‚ for his able guidance‚ support and cooperation throughout my project‚ without which the
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893 VALUATION Relative Valuation – Based on Multiples Bharti Airtel and Zain Africa recently announced signing of the definitive merger agreement‚ wherein Bharti will acquire African operations of Zain Group. The deal was valued at an enterprise value of USD 10.7 billion or on an 8.2x EBITDA Multiple. Goldman Sachs has invested USD 450 million in online social networking portal Facebook‚ which is valued as the number one social networking network at USD 50 billion. At an enterprise value
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Bharti Airtel responded by entering‚ the seemingly lucrative local sector‚ which appeared
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