...company, the majority of shareholders and its other constituencies, such as employees, suppliers and the communities in which it operates. Among the biggest losers in this deal is the Ford family, which took its $1.4 billion of proceeds in stock. The paper loss on those shares now approaches $1 billion. Since the deal closed Aug. 2, 2000, Ford stock has fallen from about $27 a share (adjusted for the transaction) to Friday's $8.27. If you had 100 shares and took the cash, you've got $2,000 plus 100 shares now worth $827. Your total: $2,827. If you took the stock, you've got little more than half that much: 175 shares now worth $1,447. Look, I'm not saying that all big stock buybacks or big one-time dividends end up with companies stripping themselves of cash that they later wish they had back. Many of these deals turn out perfectly well. But whenever you see a company in a cyclical and capital-intensive business such as cars doing huge stock buybacks or jacking up its dividend sharply or talking about having more cash than it needs, it's probably a sign that the cycle has peaked. http://www.washingtonpost.com/wp-dyn/content/article/2006/09/04/AR2006090401007.html http://www.fool.com/ddow/2000/ddow000628.htm FORD MOTORS CORP - VALUE ENHANCEMENT PLAN 1. Does Ford have too much cash? • Liquidity Analysis: Quick Ratio and Current Ratio. Find the industry standard and compare! Quick ratio = (current assets – inventories) / current liabilities...
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...cash, additional new common shares or a combination of cash and new share. Based on the following analysis, Ford should go ahead with Value Enhancement Plan. Characteristic of VEP The Value Enhancement Plan has the feature of stock split and share repurchase. Exchanging existing shares for new shares on a one-for-one basis, shareholders are also offered the option to reinvest $20 to receive additional new Ford common shares. In this sense, share price would decrease while the number of shares outstanding is going to increase. According to Ford's announcement mentioned in the case, shareholders choosing the share option would receive 0.748 new Ford common shares in lieu of $20 cash. So, the effect is similar to 1.748 for 1 stock split. However, not all the shareholders prefer share option. For those who elect cash option, they would receive $20 as though they sell part of their shares, which reflects the feature of share repurchase. Advantages of VEP With the combined feature of stock split and share repurchase, VEP has its strength. In terms of cash option, since there is no good things to do with the massive cash reserve, returning the excessive cash allows shareholders to make profitable investment by themselves. Unlike cash dividend, returned cash is taxed as capital gains, so it generates tax efficiency for shareholders. In addition, though the price of new Ford shares would decrease, shareholders will not bear any loss, because the reduced price is offset by the cash...
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...PEROLD On April 14, 2000, Ford Motor Co. announced a shareholder Value Enhancement Plan (VEP) to significantly recapitalize the firm’s ownership structure. Ford had accumulated $23 billion in cash reserves, close to the company’s largest ever cash position and significant relative to Ford’s $57 billion equity market capitalization. Under the VEP, Ford would return as much as $10 billion of this cash to shareholders. In exchange for each share currently held, the plan would give stockholders one new share plus the choice of receiving $20 either in cash or additional new Ford common shares. Ford also announced that it would distribute ownership of its Visteon Corp. parts unit to shareholders. Ford’s share price had performed poorly over the previous year (Exhibit 1), and the proposal drew a positive reaction from analysts who had been urging the company for months to distribute cash to stockholders. Some hailed the VEP as the boldest step yet by Ford Chairman William Clay Ford Jr. and Chief Executive Officer Jacques Nasser to convince investors that they were undervaluing the world’s No. 2 automaker. However, the plan raised a number of questions for investors. Why was Ford proposing this transaction instead of a traditional share repurchase or a cash dividend? How did the interests of the Ford family factor into this decision, and what did the transaction imply about the future involvement of the family in the company? Why was Ford distributing such a significant...
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...Background Ford Motor Company was founded by Henry Ford and 11 investors in 1903. The company is based out of Dearborn, Michigan. Ford Motors is a worldwide company, with 335,000 employees, operating in 25 countries and on six continents. Ford changed the way cars were made with their innovative assembly production methods. Having gone public in 1956, the company grew to become the world’s largest truck manufacturer and the second largest total automotive manufacturer. In addition to manufacturing cars and trucks, they are involved in producing components/systems and are engaged in financing and rentals. Ford experienced significant growth derived from company acquisitions. The acquisitions leading up to 2000 consisted of Hertz Co., Jaguar, Volvo, and Land Rover. Auto industry sales are sensitive to the economic cycle. Echoing this notion, Ford’s sales tend to experience volatility during times of economic recessions and booms. In these turbulent times, the company has a high variability of cash on hand and equity market value. In 1999, Ford had a net income of $7.2 billion (approximate 4.5% profit margin), and revenues of $162.6 billion. Ford’s automotive segment accounts for 85% of total revenue. Their US car and truck sales are responsible for 24.1% of the total market share. As of 2000, Ford had 1.15 billion common shares of stock and 70.9 million shares of Class B stock. Among these two shares, the Ford family held all Class B shares, which gave them special voting...
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...February 15, 2014 Subject: Ford’s Shareholder Value Enhancement Plan (VEP) Evaluation Ford Motor Company Ford Motor Company is an American automaker, it is the world's fifth largest automaker based on worldwide vehicle sales. Its headquarters are based in Dearborn, Michigan, which is a suburb in Detroit. Henry Ford founded Ford Motor Company on June 16, 1903 and it became one of the largest and most profitable companies in the world, as well as being one of the few to survive the Great Depression. Ford Company is the largest family-controlled company in the world; it has been in continuous family power for over 110 years. Ford now incorporates two brands: Ford and Lincoln. Ford once owned 5 other luxury brands which where were Volvo, Land Rover, Jaguar, Aston Martin and Mercury. But over time those brands were sold to other companies and Mercury was discontinued. Nasser was CEO of Ford Motor Company from 1998 to 2001. Todays CEO is Alan Mulally. Brief Summary of the Article The article talks about how in April 2000, Ford Motor Co. announced a shareholder Value Enhancement Plan (VEP) to recapitalize the company’s ownership structure. Ford had accumulated $23 billion in cash reserves and under the VEP would return as much as $10 billion of this cash to shareholders. For each share currently held, the plan would give stockholders one new share in addition to choosing either $20 in cash or additional new Ford common shares. Shareholders that would choose to receive cash would...
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...Question: FORD MOTOR COMPANY’S VALUE ENHANCEMENT PLAN (VEP) Q1. Vote in Favour or against of Ford Value Enhancement Plan? Vote in favour of ford’s Value enhancement plan for reasons discussed below: 1. Choice to Investor: It clearly gives the choice of investment and possible returns that could be obtained to the investors. They can make the choice for themselves depending future prospect of pay-out that they would prefer. 2. Share Advantage: For example if we take an investor has 100 shares in the company, if he would prefer to receive extra shares instead of a cash pay-out he would now have 174.8 shares in place of the 100 he initially had, an increase of almost 75% of shares owned by him. With the increase in the number of shares an investor owns, even though the share price will fall it gives the investor the advantage of selling a part of their shares for a more profitable investment and still a retain considerable number of the company shares. If the company were to conduct a share repurchase it would take considerable amount of time before all the shares could be bought back as the limit for daily repurchase is set at 25% of their volume. It could take up to almost a year by the time ford can repurchase the shares for $10 billion. So VEP adds value as they provide an option where they can repurchase a lesser percentage of their shares. 3. Pay-out Advantage: For an investor who would prefer to receive cash pay-out in place of receiving more shares, with the VEP he would...
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...Case Study: Ford Motor Company’s VEP Question 1 Go ahead with the Value Enhancement Plan The feature of having both cash and new share options makes the VEP have its strengths and makes an excellence choice for Ford Motor Company. The cash option solves the problem of Ford having massive amounts of extra cash. Since Ford has no profitable activities for the extensive amounts of cash, returning the excess cash to shareholders allows them to make profitable investments. Different from a cash dividend, the returned cash will be taxed as capital gain and therefore achieves tax efficiency for the shareholders. When looking at the company’s point of view, they are able to lower the dividend payment because there will be an increase in number of shares. This would result in the dividend amount per share to most likely decrease and the total amount allocated to a dividend payment to stay constant. This will make dividends for the new Ford shares to go down because share price falls. Those who elect the $20 cash payout will maintain ownership of the same amount of shares they previously owned, therefore, the total dividend payment then becomes reduced. As a result of the cash payout, the number of new shares outstanding will reduce, this increases the earnings per share and, because of the increased rarity of shares, the overall demand for Ford's shares will increase. With higher demand in shares, comes a higher share price in the future. The stock option satisfies the shareholders...
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...NAME OF THE BOOK - Odour Of Chrysanthemums. NAME OF THE AUTHOR - David Herbert Lawrence (D H Lawrence). SOURCE - eBook. No. of Pages - 11. PUBLISHERS DETAILS - Published in "The English Review" Magazine, in June 1911 by editor "Ford Madox Hueffer". He was also an author of various books written under the name of "Ford Madox Ford". ABOUT THE AUTHOR - David Herbert Richards Lawrence (11 September 1885 – 2 March 1930) was born in Eastwood, Nottinghamshire, England. He was an English novelist, poet, playwright, essayist, literary critic and painter. His notable works include Novels (Sons and Lovers, The Rainbow, Women in Love, Lady Chatterley's Lover), Short Stories (Odour of Chrysanthemums, Daughters of the Vicar, The Man who loved Islands), Play (The Widowing of Mrs Holroyd), etc. His collected works represent an extended reflection upon the dehumanising effects of modernity and industrialisation. In them, Lawrence confronts issues relating to emotional health & vitality, spontaneity, and instinct. In his later years he continued to write despite his failing health. In his last months he wrote numerous poems, reviews and essays. He died at the Villa Robermond in Venice, France, in March 1930, from complications of tuberculosis, after being discharged from a TB sanatorium. DESCRIPTION OF THE STORY - "Odour of Chrysanthemums" focuses on a dramatic moment in the life of Mrs. Elizabeth Bates and the accidental death of her husband, Walter Bates. The story goes on telling...
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...SUFFOLK UNIVERSITY SCHOOL OF MANAGEMENT Graduate Programs in Finance Fall Quarter, 2011 FIN MF 820 Financial Policy Thursdays: 7:15-9:55 Instructor: Dr. Shahriar Khaksari, CFA Office: S432 Phone: 573-8366 Email: skhaksari@suffolk.edu The New Corporate Finance: Where Theory Meets Practice Mcgraw-Hill Series in Advanced Topics in Finance and Accounting Course Objective This course is designed to allow students to develop a deep understanding of financial theories, techniques, and models applied to the study of corporate financial decisions. It covers aspects of corporate strategy, industry structure, and the functioning of capital markets. The course consists of three segments. In the first segment, students do a comprehensive analysis of the assigned cases and prepare a written report that includes identification of major issues, alternative approaches, analysis of each alternative, and a concluding part in which students take a clear cut position in how they would approach the problem as a decision maker and defending their position. The Case study is done by groups (three to four students per group). The text analysis should not exceed five pages. It should be typed and double-spaced. A lengthy summary of the case is unnecessary and redundant. The space constraint should discipline students to be concise at differentiating major issues from the less important ones. All the tables, graphs and related...
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...Great American Innovators America has gone through great change from its foundation to present day. Many people have helped to shape the great country in which we proudly call home. Our nation has produced some of the great innovators who shaped the industrial revolution, modern day communications and the use of electric light bulb. The simplest things that we take for granted once were the greatest innovations of their time. Thomas Edison, Alexander Graham Bell and Henry Ford are three of the greatest men that have contributed directly to a many things that we use in our day to day lives and without these men we would not be the advanced society that we are today. Reaching for a light switch is something we do every day. This is possible due to the contribution of Thomas Alva Edison, the inventor of the light bulb. Edison was born on February 11, 1847, in Milan, Ohio (Frith 5). He did not attain a formal education due to the poor family in which he was raised instead he started working on the railroad at age 12(Frith 14). Although Edison did not complete school, he continued to learn and experiment. Edison set up a printing press in the baggage car on the train and sold his own newspaper to the passengers (Frith 17). He retold the news from one end of the rail line to the other end of the rail line, allowing the people to be better informed of their neighboring towns. He was also able to have a small lab to perform scientific experiments, at least until his chemicals...
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...Born on February 11, 1847, in Milan, Ohio, Thomas Edison is the quintessential American inventor. Before he died, he gave us the phonograph, the transmitter for the telephone speaker, an improved light bulb, and key elements of motion-picture apparatus, as well as other bright inventions. He also created the world's first industrial research laboratory. Edison died on October 18, 1931, in West Orange, New Jersey. CONTENTS Synopsis Younger Years Early Career Becoming an Inventor Edison Illuminating Company Industrialist and Business Manager Final Years QUOTES "Opportunity is missed by most people because it is dressed in overalls and looks like work." – Thomas Edison « prev1 / 2next » Younger Years Born on February 11, 1847, in Milan, Ohio, Thomas Alva Edison was the last of the seven children of Samuel and Nancy Edison. Thomas's father was an exiled political activist from Canada. His mother, an accomplished school teacher, was a major influence in Thomas’ early life. An early bout with scarlet fever left him with hearing difficulties in both ears, a malady that would eventually leave him nearly deaf as an adult. In 1854, the family moved to Port Huron, Michigan, where Edison attended public school for a total of 12 weeks. A hyperactive child, prone to distraction, he was deemed “difficult” by his teacher. His mother quickly pulled him from school and taught him at home. At age 11, he showed a voracious appetite for knowledge, reading books on a wide...
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...Ronald Reagan an Overrated President Tami Arreguin HIS/145 July 15, 2013 Nancy Fraleigh Ronald Reagan an Overrated President Ronald Reagan, the nation's 40th president, only recently became one of the most revered men in history. Reagan's ratings were higher than the averages of his three immediate predecessors Jimmy Carter, Gerald Ford, and Richard Nixon (Newport, Jones, & Saad, 2004) . How and why would so many Americans too soon forget all of the dishonesty and broken promises that came out of the White House while Reagan was in office? It is clear that many factors came into play that goes to show that Ronald Reagan is highly overrated as not only the president, but also an individual. One of the first situations that occurred, as Reagan was sworn in, was the release of the 51 hostages from the American Embassy in Tehran. It seemed that the projected win of the future President Reagan triggered some fear in the Iranians. However, there were a few incidences that occurred, prior to the inauguration of Reagan, that actually set the stage for the emanate release of the hostages. (United States History, n.d.) In July, near the last leg of the presidential race, The Shah of Iran died. The return of the Shah, being one of the many requests in negotiations with the Iranian’s, was now neutralized. This brought the negotiations one step closer to closure (United States History, n.d.). Also, shortly after the death of the Shah, Iraq invaded Iran which created...
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...The The Monkeys from the Arctic Nowadays succeeding in the music industry it’s very challenging. Moreover if you come from England and you have the pressure of big rock bands like The Beatles behind you. Arctic Monkeys have now four CD’s on the street, but as all the bands they have been trough many changes and difficulties. I personally encourage people and listen to all of their songs. The Monkeys are like wine, the older, the better. And they are only 25. After their debut in 2006, their second CD, Favourite Worst Nightmare, wasn’t so good. It was a grey come back in general. It’s entertaining because you can dance to some songs, but it wasn’t so gripping as the first one. Only the songs “505” or “This house is a circus” are impressive and shine over all the other songs. With Humbug, their third album, they reached the top. They were bored of doing the same over and over. The album starts with a lot of energy and it gets better while you are listening to all the tracks. One particular strength of Humbug, is the use of keyboards, that gives the track an innovating sound never heard before. A marked difference between the two albums...
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...My dream car would be a 1969 Chevy Camaro with a 350 engine and a four speed transmission. The name "Camaro" came from a French word for friend. The decision on the name came down to the last minute, with most of the world sure the car would be named, "The Panther." But the name Camaro fit in with other Chevy names- Corvette, Chevelle, Chevy 2, and Corvair. The main reason the Camaro was introduced was because of the huge success of the Ford Mustang. The Camaro was roughly the same size as the Mustang, a little wider and based more on high performance. The Camaro is one of the last remaining muscle cars still in production today. It is only fitting that buyers still expect maximum performance from their Camaros. It is that expectation that has kept the Camaro alive for all these years, while many other cars have faded away, lost in memory. The Mustang GT only offered the 289- cubic inch or a 390- cubic inch V8 in 1967. The Camaro rolled out with 302, 327, 350, and 396 cubic inch V8's The Camaro's style was much smoother as well. The introduction of the Camaro threw pony car (Mustang) development into frenzy. Before the Camaro, the Mustang and Barracuda were not quite considered full muscle cars. Most serious performance enthusiasts still opted for intermediate sized GTO's or the Chevelle Super Sports (SS). The Camaro changed the image of those sport coupes. The Z28 and the stout SS-396 were more than just a stylish ride. Under the hood Camaros were well respected...
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...Lincoln Gives Its Big SUV a Face-Lift Ford Plans to Formally Unveil the Restyled Navigator at the Chicago Auto Show By JOSEPH B. WHITE The face that launched a thousand supertankers is getting a makeover. Ford Motor Co. F -2.28% 's Lincoln brand is giving a new face and some new features to its venerable Lincoln Navigator, the model that jump-started the fad for supersize, fuel-thirsty luxury sport-utility vehicles when it first made its debut in the late 1990s. The restyled Lincoln Navigator from Ford. Ford Motor Co. General Motors Co. GM -2.65% 's rival Cadillac brand at first balked at following the Navigator, then countered with its own plus-size Escalade SUV, which later grew into a family of luxury versions of GM's largest SUV models. A four-wheel drive 1999 Navigator had an estimated fuel economy of 12 miles per gallon in city and highway driving. That later improved to 15 miles per gallon. The 2008 recession and a series of gasoline price spikes slashed sales of the Navigator and Escalade, and ultimately killed off GM's Hummer brand of big, high-price SUVs. But the Navigator and the Escalade survived and both are now getting makeovers. GM is planning to roll out a redesigned Escalade this spring. The revamped Navigator will be in showrooms this fall, Ford said in a statement. Ford sold just 8,613 Navigators last year, up 2.9% from a year earlier, but about a fifth of the model's peak sales in 1998. The refreshed Navigator will get a new grille, with horizontal...
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