...Continental Carriers, Inc Continental Carriers, Inc is a regulated general commodities motor carrier who had shipping routes up and down the Pacific Coast and to parts of the Midwest. They sought to acquire Midland Freight, Inc to expand its operations and were deliberating about which method to finance the acquisition. The purchase of Midland Freight, Inc would cost $50 million in cash. CCI would gain $8.4 million to its earnings before interest and tax. There were three options that the board of directors debated over: issuing new common stock, issuing preferred stock or selling bonds. As Ms. Thorp, evaluate the impact of the bond issue and of the stock issue on the EPS. What are the risks in each alternative? The bond alternative arranges to sell $50 million in bonds to a California insurance company with an interest rate of 10 percent at maturity of 15 years. There is $2.5 million sinking fund required which leaves $12.5 million outstanding at maturity. The issues with this method are as follows: Long-term-debt can be burdensome and can stunt or slow growth of the company. The company has to payback what was borrowed plus the interest on the debt. It also puts stockholders and management who are primary holders of stock at risk, because if the company earnings are substantially lower than what was forecasted then the bondholders can virtually gain control of company. The second alternative would be the possibility of issuing new common stock of 3 million...
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...FNCE90013 Case Studies in Finance SUBJECT GUIDE July – August, 2015 Prepared by George Kester Department of Finance Faculty of Business and Economics Objective To develop an understanding of applied corporate finance including financial analysis and forecasting, financing sales growth, short-term versus long-term financing, capital structure policy, capital investment analysis, cost of capital, and company valuation. The course will be experiential and focus upon selected Harvard Business School cases describing actual business situations faced by financial managers, requiring analysis, and decision-making. Professor Professor George W. Kester Texts Robert C. Higgins, Analysis for Financial Management (10th Editon), McGraw-Hill Irwin, 2012. Cases You should read and analyze each assigned case. The cases are available on the LMS page for FNCE90013. Readings Selected readings will be distributed during the course. Group Study It is recommended that you form yourselves into small study groups for the purpose of routinely reviewing and discussing assigned before each class. Your learning experience will be enhanced by such interaction and you will be better prepared for class. Presentations Copies of the PowerPoint slides of the presentations are available on the LMS page for FNCE90013. It is recommended that you print them out prior to each class. Attendance The class attendance will be taken. Participation ...
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...improving air travel demand over the next few months beginning at the end of 2009. At the end of 2009, the reported traffic statistics at many major carriers showed improving demand and revenues . Therefore, it is reasonable that the U.S. airline industry could be undergoing the start of fundamental industry demand improvement. In addition, since the industry has already reduced capacity levels, it should be able to raise fares as passenger travel demand improves. Even though oil and jet fuel prices is up sharply from 52-week lows, they are still notably lower than in 2008 , which should ease cash usage throughout the group and allow good entry points into new fuel hedge positions, thereby offering protection if oil spikes again. According to S&P, the top 10 U.S. carriers lost about $5 billion in 2009, after a $4 billion loss in 2008, as the benefit of lower jet fuel costs was eroded by lower airfares and falling passenger levels. Results in 2008 were impacted by record high oil prices. Airlines have cut fares in response to weakening demand, but we think recent cuts to domestic and international supply could help restore some pricing power. For 2010, S&P estimates a net profit of about $2.0 billion for the top 10 U.S. major airlines Continental Airlines, Inc. –SWOT Analysis Continental Airlines is a major U.S. air carrier engaged in the business of transporting passengers, cargo and mail. The company has a strong market presence and a robust hub system. The company would...
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...Harvard Business School 9-291-080 rP os t June 25, 1991 Continental Carriers, Inc. op yo In May 1988, Elizabeth Thorp, treasurer of Continental Carriers, Inc. (CCI) was considering the advantages and disadvantages of several alternative methods of financing CCI’s acquisition of Midland Freight, Inc. At a recent meeting of the board of directors, there had been substantial disagreement as to the best method of financing the acquisition. After the meeting Ms. Thorp was asked by John Evans, president of CCI, to assess the arguments presented by the various directors and to outline a position to be taken by the management at the June directors’ meeting. CCI was a regulated general commodities motor carrier whose routes ran the length of the Pacific Coast, from Oregon and California to the industrial Midwest, and from Chicago to several points in Texas. Founded in 1952 by three brothers, the firm experienced little growth until the mid1970s. At that point Mr. Evans joined the firm as president after many years as an executive of a major eastern carrier. Mr. Evans first concentrated his efforts on expanding CCI’s revenues on existing routes through an intensive marketing effort and a renewed emphasis on improving service. In 1982, utilizing the proceeds of CCI’s initial public offering of common stock, Mr. Evans began a program designed to reduce operating costs through a combination of extensive computerization of operations and improvement in terminal facilities. As a result...
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...Introduction Continental Carriers Inc is a trucking company which specialises in transporting general commodities. Since its establishment in 1952 the company operates within the district of the Pacific Coast and from Chicago to various points in Texas. It was noted that the company maintains an overall low debt policy, whereby they obtain infrequent short term loans and avoid long term debt. Furthermore with the appointment of Mr. Evans as president, the company became more profitable and experienced internal growth through intensive marketing and computerisation of operations. In order for the company to continue expanding its revenues the president Mr. Evans advocated the acquisition of Midland Freight. External financing of $50 million would be required to accomplish this goal. However, the directors have a difficult challenge with regard to the appropriate method of financing. Through extensive discussion and evaluation the directors identified three distinct options, namely, selling $50 million in bonds at a 10% interest rate to a California Insurance Company or issuing 3 million in common stocks at $17.75 per share with a dividend rate of $1.50 per share or issuing 500 000 preference shares at a par of $100 per share and with a dividend rate of $10.50 per share (See appendix A for case assumptions). Discussion 1. Given the nature of CCI’s business how much debt can it support? Continental Carriers Inc. must possess certain organizational and structural characteristics...
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...Case analysis Texas Air, Inc. I. Main Problem * Pricing Strategy Sub problem: * Late departures * Poor service and safety II. Objectives * To defend its price leadership over its competitors in the airline industry. * To amend its pricing strategy to avoid massive losses. * To shun being the lowest rank out of fourteen major airline in its evaluation on time arrival. * To improve service and safety of the Texas Air Inc. III. SWOT analysis Strengths * Price leadership * Largest airline system * High number of established, high frequency discount rates Weaknesses * Poor service and safety * Ultra low-fares Opportunities * Growth and expansion * partnership Threats * Competition * Passengers complaints IV. Alternative Course s of Actions (ACAs) ACA1. Texas Air Inc. will now be increasing its price by 30%. Expect high quality service would be given to its consumers. ACA2. Set aside pricing philosophy Peanut and MaxSaver fares. V. Recommendation We decided to adapt ACA1 because this can be better strategic move for the Texas Air Inc. In this strategy, they can avoid passenger’s complaints such as late departures, canceled flights and dirty planes. We believe that they can give their passengers a high quality services. VI. Marketing Strategy Executive Summary: Early in 1987, Texas Air bought Eastern Airlines and the financially troubled People Express. Texas merged Continental, New York...
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...Human Resource Management Delta Case Study: Improving Delta’s Profit Margin Written by Filiz McNamara, Ogochukwu Udekwe and Vicki Troftgruben February 21, 2011 Table of Contents Page Introduction 3 External Environment 3 Internal Environment 18 Systems and Stakeholder Analysis 32 Conclusion 34 Problem Identification 36 Generation and Evaluation of Alternatives 37 Recommendation 38 Decision Implementation 39 References 40 Introduction Delta Airlines was founded by C.E. Woolman, an agriculture extension agent (Anthony, Kacmar, & Perrewe, 2010). C.E Woolman was not a banker, venture capitalist or war pilot, as many of the competing airlines were. He didn’t have the aggressive military style that many of the other airline founders had. What C.E. Woolman instilled within the employees at all levels of the organization is that people matter and should be treated fairly and equitably. This philosophy led Delta Airlines to be the leader in customer service from the company’s inception through the many mergers over the years. Through the difficult financial times when other airlines were laying off employees and filing for bankruptcy, Delta continued to pay their people well and keep them employed. There was an exception during the Ronald Allen CEO era of 1987 thru 1997. Human relations took a significant down turn during his tenure as CEO, especially during 1993 and 1994, but Delta decided to part ways with Allen and began repairing...
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...17: Introduction Thursday, January 19: Clarkson Lumber Company Reading: Note on Financial Analysis a. How is the company's financial performance? (Examine appropriate financial ratios.) b. Why has Clarkson Lumber borrowed increasing amounts despite its consistent profitability? c. How has Mr. Clarkson met the financing needs of the company during the period 1993 through 1995? Has the financial strength of Clarkson Lumber improved or deteriorated? d. How attractive is it to take trade discounts? Tuesday, January 24: Clarkson Lumber Company (continued) Reading: a. Note on Financial Forecasting b. Note on Bank Loans a. How much of a loan will Mr. Clarkson need to finance the expected expansion in sales to $5.5 million in 1996 and to take all the trade discounts? (Prepare a projected income statement for 1996 and a pro forma balance sheet as of December 31, 1996.) b. As Mr. Clarkson’s financial adviser, would you urge him to go ahead with, or to reconsider, his anticipated expansion and plans for additional debt financing? c. As the banker, would you approve Mr. Clarkson’s loan request; and if so, what conditions would you put on the loan? Thursday, January 26: SureCut Shears, Inc. a. Evaluate SureCut’s financial performance using standard ratios. b. Why can’t SureCut repay...
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...I. Case Context Continental Carriers, Inc., (CCI) is known as a regular commodities motor carrier. Since its inception, it has experienced continuous growth in revenues and mastered the strategic reduction of operating costs. It soon became known in the trucking industry as a widely profitable key player. In order to sustain continuous growth in revenues and income, management has decided that key acquisitions need to be made. The top contender, Midland Freight, Inc., a common carrier company would expand CCI’s route system. The prospect company also demonstrated congruence with the type of marketing and cost reduction programs that ushered CCI’s growth. The owners of Midland agreed to sell it for $50 million in cash. Since the stipulation was for cash, the funds would have to be acquired externally so as to prevent cash flow problems that would disrupt operations for CCI. One of the primary considerations was that the pending merger would provide additional $8.4 million annually in Earnings before interest and taxes (EBIT) making it easy for management to seek external funds. Another serious consideration was that CCI has always had a consistent policy of having no long-term debt in its capital structure. In 1988, the current year, the company’s capital structure was purely composed of common stock and surplus. In addition, most of the common stock was being held by management. Furthermore, there is no dominant interest except that of...
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...understand regardless of functional specialization. Topics include financial analysis and planning, time value of money, valuation, capital budgeting, risk/return trade-offs, cost of capital, and capital structure. The pedagogical approach used is a mixture of lectures and case examples. Cases are often used as a vehicle for discussing the complexities of real-world financial problems. To benefit most from this method of teaching, you will want to come prepared to discuss the cases in detail. By the end of the semester, students should be able to: (1) describe essential characteristics of the finance profession and institutions, (2) be conversant in basic financial jargon, (3) value paper assets (stocks and bonds) and tangible assets (capital budgeting) using the tools of time value of money, including NPV and IRR, (4) explain the various sources of financing, their associated costs, and their advantages and disadvantages, (5) calculate and use financial statements and ratios to analyze a business and create and use pro forma statements for planning and decision-making purposes, (6) appreciate the complexities international business, and (7) demonstrate team skills by actively participating in group written cases. Course Materials Text: Background readings and problem sets are from Ross, Westerfield and Jordan (RWJ), Fundamentals of Corporate Finance, 8th Edition, Richard D. Irwin, Inc., 2008. You will sometimes find that the...
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...financial analysis and planning, time value of money, valuation, capital budgeting, risk/return trade-offs, cost of capital, and capital structure. The pedagogical approach used is a mixture of lectures and case examples. Cases are often used as a vehicle for discussing the complexities of real-world financial problems. To benefit most from this method of teaching, you will want to come prepared to discuss the cases in detail. By the end of the semester, students should be able to: (1) describe essential characteristics of the finance profession and institutions, (2) be conversant in basic financial jargon, (3) value paper assets (stocks and bonds) and tangible assets (capital budgeting) using the tools of time value of money, including NPV and IRR, (4) explain the various sources of financing, their associated costs, and their advantages and disadvantages, (5) calculate and use financial statements and ratios to analyze a business and create and use pro forma statements for planning and decision-making purposes, (6) appreciate the complexities international business, and (7) demonstrate team skills by actively participating in group written cases. Course Materials Text: Background readings and problem sets are from Ross, Westerfield and Jordan (RWJ), Fundamentals of Corporate Finance, 9th Alternate Edition, Richard D. Irwin, Inc., 2010 (ISBN 978-0-07-724612-9). You will sometimes find that the readings are not necessarily highly correlated with the cases. This is...
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...Continental Carriers, Inc case Continental Carriers, Inc. 1. Consider the EPS-EBIT chart. a. Why do the lines for the stock plan and the bond plan have different slopes? What’s the significance of this difference? Because the calculation of EPS is net income divided by outstanding shares, two lines for the stock plan and bond plan have different slope. The significant difference is that two variables are different on bond and stock plan. If we assume two plans have same EBIT, a net income shows different value on two plans due to the interest expense of bond, which is 5.0 million dollar in every year till maturity. Another compounding that used to calculate EPS is outstanding shares that also differ on two plans. On bond plan, outstanding shares would be 4.5 million whereas for stock plan is 7.5 million. b. Why are EPS equal under the two plans at an EBIT of $12.5 million? Which plan would produce the higher EPS at $10 million? At $15 million? Although the stock and bond plans have a same EPS at an EBIT of $12.5 million, equation is different. The equation is shown below: Bond plan: EPS=(Net income-Dividends on preffered stock)/(Average outstanding shares)=$4'500'000/4'500'00=$1.0 Stock plan:EPS= $7'500'000/7'500'000=$1.0 According to the graph and equation, If EBIT increases above $12.5 million, bond plan will produce higher EPS because increasing debt affects to increase leverage. If EBIT decrease below $12.5 million, stock plan will produce higher EPS. Exact...
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...Current Financial Characteristics of CCI The motor carrier industry is highly regulated, resulting with high level of financial stability. Through government regulations, more specifically from the U.S Interstate Commerce Commission (ICC), Continental Carriers and others have received steady financial resource allocations and maintained steadily increasing profits with minimal fluctuations over the years. In addition, with the government’s tight entry control, the industry is able to create a high market entry barrier to prevent new entrants from gaining market shares. On top of that, rate regulations have helped prevent destructive competitions within the industry. Traditionally, Continental Carriers has maintained a consistent policy of avoiding long-term debts or any type of fixed debts, and it has financed itself through retained earnings along with proceeds of its previous stock offering and short-term bank loans, which do not occur often. More importantly, since most of the common stock is held by the management itself, CCI is able to maintain more control over financial decisions. These as a whole have contributed to its current economic state of steady increase in income and dividends per share (from 1$ to 1.5$ per share). Nevertheless, one of the financial problems that CCI currently encounters is the subpar performance of company’s common stock. Although the operating revenue and income per share have both been steadily increasing, the average market price of common...
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..._____________________________ ____________________________ _____________________________ Course Title: Busniess Management Lecturer Name: John Lamont Module/Subject Code: B8MG022 Module/Subject Title: Project Planning Techniques Assignment Title: Denver International Airport No of Words: 2600 Note technical support is available to student between 0930- 1700 hrs only. There is no technical support after 1700 hrs. It is your responsibility to ensure that you allow time to troubleshoot any technical difficulties by uploading early on the due date. Assignment introduction and contents Based on the Case Study supplied on the construction of Denver International Airport we have conducted our own analysis and observations of the information in the case in order to answer the following set of questions: 1) Is the decision to Build at Denver Strategically a Sound Decision? 2) Perform a SWOT analysis on the Decision to Build? 3) Who are the Stakeholders and what are their interests or objectivies? 4) What Appears to be the Single Greatest Risk in the Decision to build DIA? 5) Do Scope changes reflect upon the ineffectiveness of a project Management Team? 6) Why did United Airlines decide toact as the project manager for the baggage handling system on Concourse B? Denver International Airport The Strategic Decision When looking at upgrading or building an airport as a feasibility amenity it would seem strategically sensible to look to fulfil needs in both the near...
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