CASE STUDY 1: The Wm. Wrigley Jr. Company capital structure‚ valuation‚ and cost of capital [10 MARKS OUT OF 100 MARKS TOTAL] Semester 1‚ 2013 Background: The term capital structure refers to the way a corporation finances its assets through some combination of equity and debt. Each form has its own benefits and drawbacks and firm managers attempt to find the perfect capital structure in terms of risk / reward payoff for shareholders. See these podcasts:
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EFB340 – Finance Capstone DOING CASE STUDIES INTRODUCTION Finance Capstone case studies are aimed to introduce you to a real-life work environment which is largely unstructured. You are required to do 4 cases relating to the 4 topics (modules) outlined in the Week One document and Lecture 1. While the first three cases are the responsibility of the entire group‚ the fourth case (the technical paper) is the sole responsibility of the individual. In this way‚ you will obtain experience at
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in estimating the cost of equity. 2. Beta: You should unlever Wrigley’s current beta of 0.75‚ assuming the current values of book debt and the market value of equity. This gives an estimate of the unlevered beta of 0.75‚ reflecting the fact that Wrigley has almost no debt.3 This beta then needs to be relevered to reflect the addition of $3 billion in debt. Using the formula produces a levered beta of 0.87. All in all‚ this is not much of a change. Why? The answer is twofold: first‚ the market value
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INTRODUCTION * Wrigley has a one sided capital structure * Their interest rates has been at their lowest in 50 years * However‚ they have the leading market share in a stale low technology business * Blanka Dobrynin‚ the managing partner of Aurora Borealis LLC (a company who used a hedge fund to invest in companies who are in distress‚ merger arbitrage‚ change-of-control transactions‚ and recapitalization) wanted to investigate a potential investment of $3B in Wrigley * Wrigley being an
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KEY PERFORMANCE INDICATORS: UNDERSTANDING HOW TO KEEP YOUR EYE ON THE DASHBOARD The quality of your discussion is judged according to the variety of issues you address‚ the depth‚ logic‚ and structure of your writing (refer to Article 1 discussion under Lecture 2 material for example discussions). As your discussion should demonstrate the elements of critical thinking‚ you are advised to refer to the AREA critical thinking framework document (under Lecture 2 material) for further guidelines. The
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Statement of the Problem: The William Wrigley Company is the world’s largest manufacturer and distributor of chewing gum. Over the preceding two years‚ revenues had grown at an annual compound rate of 10% and earnings grew 9%‚ these increases are a direct result of the introduction of new products and foreign expansion. As illustrated in the graphical diagrams in Exhibit 4 (appendix)‚ the company’s stock price had significantly outperformed the S&P 500 Composite Index‚ and performed slightly ahead
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CAPSTONE PROJECT Project Title: APPLICABLE FINANCIAL POLICIES CHANGES THAT CAN BE USED TO ENCOURAGING HOUSE AND HOME OWNERSHIP IN MICHIGAN Submitted by: Submitted to University MBA/MS Program [list one] Capstone Mentor: [name] For University Use Date Received: ______________________________________________ Reviewed by: _______________________________________________ Approved/Disapproved: ______________________________________________
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managing director of Aurora Borealis hedge fund‚ considers the possible gains from increasing the debt capitalization of The Wm. Wrigley Jr. Company. Blanka suggests Wrigley raise the amount of $3 billion in debt of the capitalization while Wrigley has been conservatively financed and remained no debt at the end of 2001. This report is aiming to analyze whether Wrigley should use $3 billion debt recapitalization to either pay dividends or to repurchase shares. 2.0 Current Capital Structure
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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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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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