Wrigley Jr. Company Essay Example for Free

Wrigley Jr. Company Essay 1.0 Introduction In June 2002 Blanka Dobrynin, a 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 Generally, firms can choose among various capital structures in order to maximize overall market value of the company. It is proposed however, that Wrigley issues $3 billion in debt. According to the trade-off theory, the optimal capital structure does exist (Kraus and Litzenberger, 1973). The higher level of debt may increase both bankruptcy and financial cost that lead the firm to go or avoid bankruptcy. However, there are several advantages of raising debt capital. Firstly, tax-deductions which decrease the cost of debt. Secondly, stockholders do not have to share the profit when the firm has excess, as debt holders are limited to their fixed return. Finally, stockholders do have voting right but debt holders do not which means the stockholders are controlling the business. 3.0 The Impacts of Proposed Changes The decision to increase $3 billion debt capitalization of the Wm. Wrigley Jr. Company by Blanka Dobrynin is to optimize the total value of the company. Firms are often inclined to choose debt over equity in order to use the tax shield. As the increasing of $3 billion debt in Wrigley’s capital structure, its equity value will increase by $1.2 billion due to the tax shield. Also this proposal of recapitalization will help Wrigley’s equity decrease by only $1.8 billion when they payout $3 billion debt, due to the offset by the $1.2 billion tax shield. According to our calculations, through recapitalization Wrigley’s total asset will be $14,459,826, which consists of $3,157,127 debt and $11,302,699 equity. In general, firms prefer to keep a higher level of debt/equity ratio to obtain larger total capital to increase the firm’s total value. But it is obvious that more debt means more risk and more payout. By assessing the spreadsheet, it suggests several reasons for and against the acquisition of debt. If the Wrigley’s debt increases, its credit rating will drop from AAA to BB, which leads to more cost of future financing and value of stocks. However, as debt can increase firm value up to a degree, we recommend that Wrigley’s find an optimal capital structure through further analysis of whether $3 billion of debt provides the smallest possible Weighted Average Cost of Capital (WACC) for the firm. 3.1 Flexibility and Reserves According to Denis (2011), financial flexibility is the ability of a firm to make decisions and handle problems timely. Moreover, the firm should always maximize their firm value on any unexpected changes in investment opportunity and cash flows of the firm. In addition, the firm should prudently raise their capital in the good times to avoid stretching their capabilities too far, and in order to preserve their ability to choose to either borrow or issue equity in future times of need. Therefore, the lower level of firm’s debt, the more financial flexibility a firm has (Investopedia, 2014). Due to that $3 billion new debt existing, the financial flexibility of Wrigley will decline; this financial activity leads to lower ability to borrow money in the future if there are any profitable investment opportunities or any unexpected internal or external shocks. 3.2 The Book and Market Price per Share As is visible from the Appendix One, the decision of how to use the funds raised through debt is an important one as it will impact both the price per share and the book value per share. The price per share will decrease to $48.63 if the debt raised is used to pay out a dividend (decrease in the value of equity), whereas the price per share will increase to $61.53 if it is used to repurchase shares. However, the issuance of debt can have signalling effects for investors. Generally, when firms issue debt it signals to investors that the firm is in a good financial situation as the firm is able to undertake repayments of future interest. Furthermore, the clientele effect can impact the stock price because it assumes that the investors are attracted to the company for its policies and when these change the investors will react and adjust their stock accordingly (Moles Terry, 2005). In addition to this, the issuance of debt and repurchase of stock could signal to investors that managers believe the stock in undervalued. Despite this change in price, the Weighted Average Cost of Capital (WACC) will give a more accurate representation of what the change in capital structure implies for the firm, by taking account the costs of debt. 3.3 Weighted Average Cost of Capital Before recapitalisation Wrigley’s WACC was equal to it’s cost of equity (ke), which was calculated at 10.95%. After capitalisation it was found that Wrigley’s WACC decreased to 10.29%. This follows the general pattern of increasing debt resulting in a lower WACC. The cost of debt (kd) rate of 13% was used after we assessed the key industrial financial ratios and compared  them with that of Wrigley’s (See Appendix 2) to conclude that it was in the range between the BB rate of 12.753% and B 14.663% (see Appendices 3 4). Although WACC has decreased, which means that every $1 that Wrigley raises in capital from investors it must pay at least $10.30 in return, it’s Beta has increased from 0.75 to 0.87. This means that Wrigley’s investment is still less volatile than the market, but it has become more in line with the market after recapitalisation. However Beta will not incorporate the risk of financial distress that becomes present once Wrigley have taken out the debt. 4.0 Conclusions and Recommendations Therefore, from our analysis we know that an increase in debt can have adverse affects on flexibility and can have costs associated such as bankruptcy, agency and distress costs, however, due to the tax shield affects and the decrease in WACC we believe there should an increase in the level of debt. In addition, the share price change is not consistent with the change in WACC and it could be assumed that the distress costs associated with the increase in debt would mean the price would actually remain relatively steady to reflect the negligible change. We recommend that Wrigley issue $3 billion of debt in the form of share repurchase plan because this scenario has no defining impact upon WACC – slightly decreasing from 10.95% to 10.29%, and as a company’s main goal is to increase its’ shareholders value. Furthermore there are fewer risks in terms of clientele effect and signalling effect, while also allowing the Wrigley family to maintain their control with their high portion of shares. However, we recommend further analysis to determine what is the optimal level of debt by finding the lowest possible WACC, and therefore maximising the company’s value. 5.0 Reference List DeAngelo, H., DeAngelo, L., Whited T.M., (2011) Capital structure dynamics and transitory debt. Journal of Financial Economics, 99, 235–261. Denis, D J. (2011) Financial flexibility and corporate liquidity. Journal of Corporate Finance, 17(3), 667-674. Franco Modigliani; Merton H. Miller . (Jun., 1958) The American Economic Review, Vol. 48, No. 3. , pp. 261-297. Investopedia. (2014). Complete Guide To Corporate Finance. Retrieved from http://www.investopedia.com/walkthrough/corporate-finance/5/capital-structure/capital-structure.aspx Investopedia (2014). Optimal Capital Structure. [ONLINE] Available at: http://www.investopedia.com/terms/o/optimal-capital-structure.asp. [Last Accessed 19 Aug 2014]. Kraus, A. and R. Litzenberger (1973). A State-Preference model of optimal financial leverage. Journal of Finance, Vol. 28, pp. 911-922. Moles, P., Terry, N. (2005). Clientele effect. The Handbook of International Finance Terms. Retrieved from http://www.oxfordreference.com.ezp01.library.qut.edu.au/view/10.1093/acref/9780198294818.001.0001/acref-9780198294818-e-1351 Myers, S.C. (2001). Capital structure. Journal of Economic Perspective, Vol. 15, pp. 81-102. Tsuji, C. (2012) A discussion on the signalling hypothesis of dividend poilcy. The Open Business Journal, 5, 1-7. Retrieved from http://benthamopen.com/tobj/articles/V005/1TOBJ.pdf

Huck Finn :: essays research papers

Satire in Huck Finn   Ã‚  Ã‚  Ã‚  Ã‚  In the first few chapters of Huckleberry Finn, we can see traces of satirical elements begin to emerge from within the story. The very first satirical scene occurs after Tom plays a trick on Jim, Miss Watson’s slave. Huck goes on to describe how Jim reacts to finding his hat hung on a limb above his head. â€Å"Afterwards Jim said the witches bewitched him and put him in a trance, and rode him all over the State, and then set him under the trees again and hung his hat on a limb to show who done it.† This note that Huck makes may have served a humorous purpose during older times, when Blacks were stereotypically superstitious. This also shows Jim’s gullibility and is referred to later on in the story.   Ã‚  Ã‚  Ã‚  Ã‚  In the first eleven chapters of the story, the only evident character and element in the story being satirized is Jim and the simple stereotypes of an African American living in Finn’s and Clemens’ time. Jim is once again satirized in chapter ten, where he is bitten after Huck places a dead snake near his blanket. Jim, being superstitious, chides Huck after he touches a snakeskin earlier in the story. Huck ignores this and places a dead snake at the foot of Jim’s blanket one night and Jim gets bitten in the foot by the dead snake’s mate. This portion of the book once again satirizes Jim’s superstition and adds to the element of humor in the story by describing the treatment that Jim applies to his foot after he is bitten. â€Å"He was barefooted, and the snake bit him right on the heel. That all comes of my being such a fool as to not remember that whenever you leave a dead snake its mate always comes there and curls around it. Jim told me to chop off the snake’s head and throw it away, and then skin the body and roast a piece of it.

Hershey Essay

The Hershey’s company mission is â€Å"Bringing sweet moments of Hershey happiness to the world every day. † Hershey’s mission statement is short and sweet. They are able to address the majority of the nine components of the mission Statement with one sentence. Their customers are the world, their product is Hershey, their market is the world, their philosophy is to bring happiness, and their self-concept is that they perceive themselves as a company that can bring happy moments to individuals who use their products across the world everyday. There are nine component of mission statement ,whisch is Customers, Products/Services, Geographic Markets, Technology, Concern for Survival, Philosophy, Public Image and EmployeesDistinctive Competence. The mission statement needs to include some description of the function of the business. For example, â€Å"to promote industrial excellence,† tells customers and employees nothing. A more effective description would be â€Å"To provide management consulting services. † An effective mission statement sets out, in broad terms, the target market. A manufacturer that makes nuts and bolts might set its target market as retail hardware stores, machine manufacturers, or both. The business must determine what region it serves best and relay that information by way of the mission statement. A garage, for example, might limit its target region to the community while a magazine company might target an entire country. Mission statements typically include a statement of company values. Values such as customer service, efficiency and eco-consciousness often appear on lists of company values. At their best, company values should express principles the company explicitly tries to affirm in day-to-day operations. For businesses that rely heavily on technology, the mission statement should include a description of the essential technology the company does or plans to employ. If nothing else, this directs purchasing agents toward the appropriate vendors for goods and services. Every company has a policy regarding its relationship with employees. A mission statement provides an opportunity to describe that policy in brief so employees know the essentials of where they stand. Effective mission statements also include a brief description of the business’s strategic position within the market. For example, the company might excel at serving residential clients and seek to maximize that strategic advantage. For for-profit ventures, businesses require clear financial objectives. A start-up company might set one of its financial objectives as making an initial public offering of common stock within two years. This lets the employees and potential investors know the company intends to go public, with all of the legal and record keeping ramifications that entails. Like people, companies develop public images. Careful companies craft the public image they want to establish and lay out the major features of it in the mission statement. This helps managers direct employees that stray from the sanctioned public image. Hershey’s objectives * To promote the health benefits of Hershey Chocolate * Help the consumers change their mind-set that chocolates are unhealthy * To spread awareness and increase sales of product Critically analysis the strategic objective of Hersheys company. Answer : Hersheys as the popular chocolate company has provided a good list of objectives of their company. Firstly, Hersheys company try to give an effort on promoting the health benefits of their product to shared it with thier customer. For the example, Hersheys company win their customer by influence them to make a choice Hersheys chocolate as the best healthy chocolate. This parallel to the second objective of Hersheys company that to bring hope to help the consumers to change their mind-set about the unhealthy of taking chocolate. So that, by implement the first and second strategy Hersheys company can increase sales of product and spread awareness well. Based on Specific, Measurable, Attainable, Responsible person and Time specific (SMART) Hersheys Company not follow the technique wisely. For the Specific part, Hershey company fail to specific their goals. They must try to answer the questions of how much and what kind with each goal writen. On part Measurable, the company must set the goals that stated in quantifiable terms, or otherwise they’re only good intentions. Measurable goals facilitate management planning, implementation, and control. Hershey shown the implement to getting the customers that has mind-set of chocolate is a healthy junk food. Besides that, the third aspect of SMART technique is Attainable that talk about the goals must provide a stretch that inspires people to aim higher and make sure the goals must be achievable, or they’re a set-up for failure. For the Hershey company, they objective or goals that want to change customer mind-set about taking chocolate is a good habits that inspired their customers to increase their loyalty. Fourth aspect is the responsible person or group of department to take the responsibility to run the objectives. The goals must be assigned to a person or a department. But just because a person is assigned to a goal doesn’t mean that she’s solely responsible for its achievement. Hershey company did not state clearly who or what department must take the important part of implement the objective of the company. Lastly, aspect of time specific which is reference to time, the goals must include a timeline of when the goals should be accomplished. The Hershey did not state it in their objective. This is make the goals can become flexible to achieve that never based on time setting. Besides that, Hershey company also has their own strategy as an backup of their objective which is entering new market in Canada, United States, Mexico,Brazil and other international locations(India,The Philippines ,Japan and China), producing new products with new brand name, expanding its global presence via joint venture and merger, supporting environmental and social projects, increase sales using promotional materials and the last is roducing healthy chocolates.

Iv. Optimizing Availability Provisioning In Nfv . Even

IV. OPTIMIZING AVAILABILITY PROVISIONING IN NFV Even though the efficiency is greatly improved, our framework is still impractical in the sense that the process can be further prolonged with 1) a even higher availability requirement, which is normal in a carrier-class network [18] (usually requires an availability of 99.999% or 99.9999% (5’9s or 6’9s)); 2) more requests; and 3) longer contract period duration. The root cause the process takes such a long time is it depends on the strategy we use to provision backups and how many backups are needed. In other words, if we can accurately estimate the least possible number of backups needed without running the trial-and-error process, a great amount of running time can be saved. The process†¦show more content†¦Let _rk = P[Nr i = kr], kr = 0; 1; : : : ; nri + kr i be the probability mass function (pmf) for the Poisson binomial random variable Nr i , then the cumulative distribution function (cdf) of Nr i , denoted by FNr i (kr) = P[Nr i _ kr], kr = 0; 1; : : : ; nri +kr i , gives the probability of having at most kr successes out of a total of nri + kr i , and can be written as [26]: where Rm is the set of all subsets of m integers that can be selected from f1; 2; : : : ; nri + kr i g, and Ac is the complement of set A. Therefore, we have Thus, the probability that all the VNFs are available can be expressed as However, computing such a function is not easy, which requires one to enumerate all elements in Rm, which requires to consider an exponential number of scenarios. It is huge even when nri +kr i is small. In general, we can have the following theorem: Theorem 1. Verifying if the availability of a given deployed SFC request with backups is above a given threshold is PPcomplete. Proof. The detailed proof is ignored here due to the limited space. In general, we can rewrite Eq. (6) as a boolean formular, where xj and _ xj represent if the j-th VM is available or not, while Q and P are replaced by ^ and _, respectively. Then the proof follows as in [13]. To efficiently compute the availability of an SFC if