J and G Distributor

In: Business and Management

Submitted By gunjanfeb29
Words 1591
Pages 7
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice-president. Your first task is to estimate Harry Davis’ cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task:

1. The firm's tax rate is 40 percent.

2. The current price of Harry Davis’ 12 percent coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,153.72. Harry Davis does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost.

3. The current price of the firm's 10 percent, $100 par value, quarterly dividend, perpetual preferred stock is $113.10. Harry Davis would incur flotation costs of $2.00 per share on a new issue.

4. Harry Davis’ common stock is currently selling at $50 per share. Its last dividend (d0) was $4.19, and dividends are expected to grow at a constant rate of 5 percent in the foreseeable future. Harry Davis’ beta is 1.2; the yield on t-bonds is 7 percent; and the market risk premium is estimated to be 6 percent. For the bond-yield-plus-risk-premium approach, the firm uses a 4 percentage point risk premium.

5. Harry Davis’ target capital structure is 30 percent long-term debt, 10 percent preferred stock, and 60 percent common equity.

To structure the task somewhat, Jones has asked you to answer the following questions.

a. 1. What sources of capital should be included when you estimate Harry Davis’ weighted average cost of capital (WACC)?

Answer: The WACC is used primarily for making…...

Similar Documents

J Fksla

.... Loan Period 1. Each category of loan will have a specific maximum repayment term and shall be clearly related to the borrower’s income and ability to repay. B. Rate of interest C. Savings Secured Loans 1. A member can borrow up to 100% of his/her shares or term deposit. 2. The manager may approve loans up to a maximum of 125% of the borrower’s shares so long as the total loan does not exceed $7500.00. D. Security for Loan 1. Loans must be secured by one or more of the following: i. Applicant/ borrower’s own savings ii. Borrower’s credit worthiness iii. Co-Maker(s) Savings iv. Land titles v. Government Guaranteed Securities vi. Debentures vii. Mortgages viii. Guarantors 2. A member is required to hold adequate insurance on any property offered as security, such insurance should be assigned to the Credit Union. NOTE: Assignment of salary is not regarded as security. It is however, a helpful collection device. E. Legal Costs 1. All legal fees incidental to the granting of a loan shall be borne by the member and may be added to the amount of the loan required. F. Waiting Period 1. Loans will be considered only after 6 months of membership, or unless waived by the Board of Directors under special circumstances. G. Loans Assessment 1. The Manager and the Credit Committee have the right to interview all co-makers and/or guarantors and may refuse security(ies) offered...

Words: 4923 - Pages: 20

J and J

...I. Background Information/Additional Perspective Johnson & Johnson Tylenol Case In 1982, Johnson & Johnson's Tylenol medication commanded 35 per cent of the US over-the-counter analgesic market - representing something like 15 per cent of the company's profits. Unfortunately, at that point one individual succeeded in lacing the drug with cyanide. Seven people died as a result, and a widespread panic ensued about how widespread the contamination might be. By the end of the episode, everyone knew that Tylenol was associated with the scare. The company's market value fell by $1bn as a result. When the same situation happened in 1986, the company had learned its lessons well. It acted quickly - ordering that Tylenol should be recalled from every outlet - not just those in the state where it had been tampered with. Not only that, but the company decided the product would not be re-established on the shelves until something had been done to provide better product protection.As a result, Johnson & Johnson developed the tamperproof packaging that would make it much more difficult for a similar incident to occur in future. How Did Johnson & Johnson Make These Decisions? The public relations decisions made in light of the Tylenol crisis had to have come from somewhere. This basis for decision making became a bit more clear in 1983, when the New Jersey Bell Journal published article written by Lawrence G. Foster. Foster, Corporate Vice President of Johnson...

Words: 836 - Pages: 4

Coor Distributor Case

...MBA5240 Coors Distributor Case September 10, 2013 Prior to presenting our POV on whether or not Larry should proceed with the purchase of the Coors distributorship in Delaware we’d like to note the following assumptions: * The $500k will be enough to actually purchase the distribution rights and fund any necessary start-up costs * After a year or two Coors can achieve the relatively same market share in DE that it has nationwide (8.9%) * While seen as a more premium and better tasting beer than segment leader Budweiser, Coors will need to enter the market at a comparable price to Budweiser (at par or a little higher than). For the sake of this case we assumed a similar price for wholesale distribution of $3.29, which could potentially be increased to better match the brands perception as a more premium offering. However, to enter this mature market pricing against the segment leader is our strategy. Leveraging the data provided, we determined the following details regarding the state of the DE beer industry along with the potential of Coors within their territory: DE Population 21+ (1990) | | Kent | 75,200 | | | Sussex | 85,300 | | | TOTAL | 160,500 | | | | | | | Delaware Consumption 21+ (1990) | | | 39.40 | gallons per year...

Words: 632 - Pages: 3

J&J Johnson and Johnson

... trust the products of Johnson & Johnson a mother has to trust the product which she gives to her baby, you have to trust the medicine you take, when it comes to health care people have to trust and with buying the J&J products people give Johnson & Johnson something back. (https://www.youtube.com/watch?v=nlTijmelPCQ) What to do in the Future The company has simply to adapt to the new market situations. People get older and chronicle health disorders are becoming more frequent. J &J has to fulfil these needs if they want to stay on top of the league. Sometimes it is useful to make partnerships or new collaborations to be innovative. It will become vital to recognise and explore new markets. For example the Asian market is booming right now and more people are in the middle class and with the money the striving for better health care increases. J&J has to be one of the first who fulfils this needs and earns the trust of these people. It is also important to get the attention of these people in the new markets therefore you have to adapt the product on the market environments. For example J&J launched Listerine Green Tea for the Asian market. (https://www.youtube.com/watch?v=iwCWSRxg3hA) List of literature Jamal Shamsie, 2007, Johnson & Johnson Renata Jennings, 2013, Copy of SWOT Analysis: Johnson & Johnson Leslie P. Norton, 2013, Embracing the J&J......

Words: 966 - Pages: 4

J and G Distributor

... of common stock. Using the CAPM approach, what is Harry Davis’ estimated cost of equity? Answer: rs = 0.07 + (0.06)1.2 = 14.2%. e. 1. What is the estimated cost of equity using the discounted cash flow (DCF) approach? Answer: [pic] = [pic] = [pic] = [pic] = 13.8%. e. 2. Suppose the firm has historically earned 15 percent on equity (ROE) and retained 35 percent of earnings, and investors expect this situation to continue in the future. How could you use this information to estimate the future dividend growth rate, and what growth rate would you get? Is this consistent with the 5 percent growth rate given earlier? Answer: Another method for estimating the growth rate is to use the retention growth model: g = (1 - Payout Ratio)ROE In this case g = (0.35)0.15 = 5.25%. This is consistent with the 5% rate given earlier. e. 3. Could the DCF method be applied if the growth rate was not constant? How? Answer: yes, you could use the DCF using nonconstant growth. You would find the PV of the dividends during the nonconstant growth period and add this value to the PV of the series of inflows when growth is assumed to become constant. f. What is the cost of equity based on the bond-yield-plus-risk-premium method? Answer: rs = company’s own bond yield + risk premium. First find the YTM of the bond: Enter n = 30, PV = -1153.72, pmt = 60, and FV = 1000, and then press the i button to find r/2 = i = 5%. Since this......

Words: 1591 - Pages: 7


... magazines such as health and fitness and clean living as an advertising source. o And finally to reach our older audience we will turn to television advertisements on weekday mornings and every evening to get more eyes on our product. Tactics and Action Plan Company G has an action plan in place that will outline the actions required in the following areas product, pricing, placement, and promotion. The product action plan will consist of finding a number of suppliers and establish company G as both the distributor and manufacturer of the G-Force Blender. The pricing action plan developed by Company G will include sales reports and extensive market research. Our product placement action plan will define the actions needed for establishing contracts in both domestic and foreign markets, as well as inventory and distribution procedures. Finally, the promotional action plan will layout the responsibilities of our marketing product when it comes to advertising the G-Force blender. Product Action Plan Tactic Due Date Responsible Party Negotiate contracts with third party suppliers to ensure supplies will be available as needed 4/30/14 Purchasing Manager Hire new employees for manufacturing center to take on workload of developing new product. 4/30/14 Human Resources 250,000 Units must be completed and quality tested, to be distributed to retailers across the United States. 5/31/14 Operations Manager Price Action Plan Tactic Due Date Responsible Party Conduct......

Words: 3602 - Pages: 15

J&J (Philippines) Case Analysis

...CASE ANALYSIS ON JOHNSON AND JOHNSON (PHILIPPINES), INC.: JOHNSON’S FACE POWDER Submitted by: Bravante, Marikon Manaligod, Kristina Salumbides, Lois Conrad Sumadsad, Beatrix Keith Tolentino, Maria Yvette I. Point of view We will take the point of view of Vice President of Marketing P.M. “Boy” de Claro because he is in-charge of the introduction of the product to the market. II. Situation Audit * In the mid-1880s, Johnson and Johnson (J&J) was founded in the U.S producing antiseptic bandages for wound care. * As the company grew larger, it started to manufacture baby care, first-aid and hospital supplies, and became the leading manufacturer of the said products. * In 1959, the firm entered in the pharmaceutical industry. * J&J sold its product in over 150 countries and had worldwide sales of $9.75 billion in 1989. * The company’s major product lines are Consumer Products, Pharmaceuticals and Medical Devices and Diagnostics. * Johnson and Johnson is an established company in the Philippines and around the world. Trusted by families in the country, it is known for catering products for babies since 1956. * Most Filipino teens use Johnson’s Baby powder as a skin freshener and as a refill to cosmetic compacts which deviate from the product’s original purpose. * Young female adults put baby powder in a handkerchief or tissue, put the package in their purse, and applies the powder in their face outside home. Inspired...

Words: 1005 - Pages: 5

J Rockk

...Hi k;v;jsflvn v lsjf sfk m d flcsdlj lj hjon oiuj h j ndsaojhasdounkjsd oinbsvjkc jaoihjosncvaokdhjcvnkjcj kjnc oin liadsjcaenj ojn djh ckj ndcjio co j ijmo jioji oij oij oij ij jio ijo jio ijo kij n n n n n nn nn n nn nn n nn n n n n n n nn n n nn n n n n n n n n nk, km e dae d c dgv sf dvc sa c esc dsa ac sadfknm f fv d c d c s c ddc d vs v asf gvf  know I will get hate on this so yeah. Music doesn't have a meaning anymore. Music is just a thing that you can listen too when you're having sex and just think about sex. Kids in this generation? No, more like "adults" this generation. I swear to god, I feel bad for kids. All they hear is sex, sex, and oh look, more sex! I could care less on what women wear. That's their buisness, but what people get upset about is that there is just a fine line between "g know I will get hate on this so yeah. Music doesn't have a meaning anymore. Music is just a thing that you can listen too when you're having sex and just think about sex. Kids in this generation? No, more like "adults" this generation. I swear to god, I feel bad for kids. All they hear is sex, sex, and oh look, more sex! I could care less on what women wear. That's their buisness, but what people get upset about is that there is just a fine line between "g...

Words: 278 - Pages: 2

J&J Amp

...To: Date: December 2 At the meeting last week, J&J was considering how it should account for the Shiny Teeth coupon drop that took place on October 1, 2012. As discussed of your concerns, we conducted our audit in accordance with auditing standards general accepted in the United States of America. My responsibility is to express an opinion on our findings of the audit. I believe that our audit provides a reasonable basis for our opinion. Our focus was on the Shiny Teeth coupon drop. The accounting issue is determining redemption rate offered on September 1 and drop on October 1, 2012. According to FASB Accounting Standards Codification 605-50-05-1a a vendor's accounting for consideration given by a vendor to a customer (including both a reseller of the vendor’s products and an entity that purchases the vendor’s products from a reseller). Such consideration (including sales incentives) offered by a vendor on either a limited or a continuous basis to a customer may take various forms including discounts, coupons, rebates, and free products or services. The accounting issue is the correct recognition of coupons offered on the sale of toothpaste. We will address the issue of timing and measurement of the revenues and liabilities resulting from the coupon. Next, we looked at the effect of the Shiny Teeth coupon drop on its financial and how it should be recognized. The sale incentive (coupon) offered by the company and retailer reduced the price of the...

Words: 971 - Pages: 4

Choosing a Distributor

...Assignment 2: Choosing a Distributor Lori Rodeffer Strayer University HTM 250: Purchasing and Cost Control Dr. Madlyn M. Bonimy November 30, 2014   Choosing a Distributor Sysco Inc. is one of the leading distribution companies in the world. They are global leaders in selling, marketing and distributing food products to restaurants, healthcare and educational facilities, and lodging establishments. Equipment and supplies for the foodservice and hospitality industries are also included in their list of products. Operating 193 distribution facilities, this company is able to service approximately 425,000 customers. For Fiscal Year 2013 that ended June 29, 2013, the company sales broke records with more than $44 billion in sales. The history of SYSCO is an extensive one that truly explains how this company was able to build itself up into the largest marketer and distributor of foodservice products in North America. SYSCO provides food and other products and services to 270,000 restaurants, schools, hospitals, nursing homes, hotels, businesses, and other organizations. Their 70 distribution facilities serving more than 150 of the largest cities in the continental United States and parts of Alaska and Canada make this feat possible. The company's line of products includes about 200,000 items, including fresh and frozen meats, seafood, poultry, fruits and vegetables, baked goods, paper and disposable items, chemical and janitorial products, beverages, dairy foods, and...

Words: 3161 - Pages: 13

J&J Memo

...MEMORANDUM Johnson & Johnson TO:                   DR. GREIN’S TEAM FROM:            ASHNA PATEL, SHAN WANG DATE:             JANUARY 27, 2015 SUBJECT:     JOHNSON & JOHNSON CASE ASSIGNMENT This memorandum has been created to investigate the long-lived assets and implications associated with Johnson and Johnson’s accounting methods.  In this memo we would like to cover five main topics: long-lived assets, depreciation and amortization, J&J policies regarding intangible assets, cash flow statements, and asset turnover/ return on assets. In 2013, J&J reported three different types of long-lived assets on their Consolidated Balance Sheet. The first kind reported was Plant, Property, and Equipment. The second one was Intangible Assets and third was Goodwill. We will be investigating these three assets in further detail.  J&J reported $16,710 million net worth of PP&E. Within this major asset category are many sub accounts: Land & Improvements, Building & Building Equipment, and Construction in Progress, Machine & Equipment, and Depreciation.  Johnson & Johnson uses the straight-line depreciation method for its assets.  In 2013, there was $2.7 billion of accumulated depreciation and amortization of capitalized interested; it increased about $.2 billion since 2012. Table 1 lays out the estimated useful lives of the assets. The company capitalizes certain computer software and development cost which are amortized over the span of...

Words: 937 - Pages: 4

J&J Analysis

.... Retrieved March 15, 2011, from http://www.metrocorpcounsel.com. Fulmer, R.M. (2001). Johnson & Johnson: Frameworks for Leadership. Organizational Dynamics, 29(3), 211-220. Govindarajan, Vijay. (1986). Decentralization, Strategy, and Effectiveness of Strategic Business Units in Multibusiness Organizations. Academy of Management. The Academy of Management Review, 11(4), 844. Grojean, M.W., Resick, C.J., Dickson, M.W., & Smith, D. B. (2004). Leaders, Values and Organizational Climate: Examining Leadership Strategies for Establishing an Organizational Climate Regarding Ethics. Journal of Business Ethics, 55, 223-241. Hendrikse, George. (1991). Organizational Choice and Product Differentiation. Managerial and Decision Economics, 12(5), 361. Hollenbeck, J., Ellis, A., Humphrey, S., Garza, A., & Ilgen, D. (2011). Asymmetry in structural adaptation: The differential impact of centralizing versus decentralizing team decision- making structures. Organizational Behavior and Human Decision Processes, 114(1), 64. Innovate to Excel. (n.d.). Retrieved March 20, 2011, from http://www.bia.ca/what-is-innovation.htm. Jack, A. (2009, November 21). J&J stays true to its diversified model. Financial Times, 11. Johns, G., & Saks, A. M. (2011). Organizational Behaviour: Understanding and Managing Life at Work (8th ed.). Toronto, ON: Pearson Education. Johnson & Johnson. (2011). Our Company: About Us: Our Culture. Retrieved March 12, 2011, from...

Words: 5893 - Pages: 24

Choosing a Distributor

...Assignment 2: Choosing a Distributor Belinda Stevenson Purchasing and Cost Control Professor Madlyn M. Bonimy November 24, 2015 Assignment 2: Choosing a Distributor About Sysco: Introduction: Distribution and supplying has always been a challenge with companies which are into distribution. Sysco has been a global leader for its distribution efficiencies. It supplies food products to restaurants within the USA. Sysco has also been associated with selling and marketing food products across the paraphernalia of restaurants, health care institutes, restaurants, and to other food industries. It supplies equipment and supplies for the hospitality and food industry. The firm serves out of 196 distribution facilities located throughout the USA, Bahamas, Canada, Ireland & Northern Ireland which take care of approximately 425,000 customers. Sysco boasts of a very diverse product line, employing around 50,300 employees Sysco sells ingredients necessary to prepare meals and also ancillary items associated with the food equipment. This has helped in bringing the Sysco difference to the lives of their customers and success to the business. ((Walker & Phillips, 2009) Sysco’s closest competitors are Bunzl plc, Jeronimo Martins SGPS, Booker Group PLC to name a few. Sysco has been able to achieve its position as a market leader in the food distribution industry due to the efficiency of operation and competitive advantages, including sustainable operational...

Words: 1099 - Pages: 5

Exxon Valdez, J&J

... better than cure.” is the most used phrase in giving warning whenever an incident is bound to happen. Avoiding an incident is better than making it worse. * Preparedness should always be next to prevention. In a company, they should consider all possible problems that may occur in order for them to have a ready answer and solution if that problem may suddenly happen. * An open communication should always be present in a company. They should be open about what is currently happening in an organization. Through this, they will be able to build a good relationship and positive image to the public. * A company must implement a long-term solution in every problem, especially if its concern is about the environmental and health situation of the affected areas and individuals. V. REFERENCES Gatdula, D., (2013). Petron claims responsibility, apologizes for oil spill, The Philippine Star. Retrieved from: http://www.philstar.com/headlines/2013/08/13/1084571/petron-claims-responsibility-apologizes-oil-spill Holba, C., et al., (2014). Exxon Valdez Oil Spill: FAQs, Links, and Unique Resources at ARLIS (Alaska Resources Library and Information Services). Retrieved from: http://www.arlis.org/docs/vol2/a/EVOS_FAQs.pdf Jiang, J. (2011). Exxon Valdez Spill Case Study Summary: Crisis Management and Strategies. Retrieved from: https://crisiscomms.wordpress.com/2011/07/02/exxon-valdez-spill-case-study-summary/ Parker, W., Wunnicke, E., Hayes, M., et al., (1990). Spill: The...

Words: 2581 - Pages: 11

J&J Case

...Problem Identification The major issue in this case is identifying the positioning and sales strategy of a new face powder product which can aid in growing the company. The primary aim is to raise the confidence of J&J employees by creating a successful product which is readily accepted in the marketplace even if the sales and profits are modest initially. Situation Overview During market analysis it has been found that one of its baby products had been used extensively by young female adults and women in a completely unintended fashion. This clearly provides an evidence of vacuum in this space and the need and opportunity to develop and market a new face powder product catering to the needs of these women. The product can be positioned either as a cosmetic/toiletry product and targeted specifically at young/adult women of varying buying power capabilities. The choice of distribution channels also plays a critical role while targeting these segments. Estimates (15-month period): Revenue: 6,500,00 peso => 2,600,000(compacts) & 3,900,000 (refills) [1:1.5 ratio] Price: 39.95(compact) vs 24.95(refills) Expected purchases : 2.6M/39.95 = 65,081(compacts) & 3.9/24.95= 156,312(refills) Potential Marketing Strategies Option 1(given in case): Toiletry product - Value Pricing - AB & C class urban females, 16-25 years old - Distribution channel- Supermarkets * Appeals to mothers looking for non-cosmetic products. * Super market distribution...

Words: 741 - Pages: 3