Finance Case Study

INSTRUCTOR: Mr. Konstantinos Kanellopoulos, MSc (L. S. E. ), M. B. A. COURSE: MBA-680-50-SUIII12 Corporate Financial Theory SEMESTER: Summer Session III Case Study The Many Different Kinds of Debt (solutions) Konstantinos Kanellopoulos 22nd August 2012 CASE STUDY ON The many different kinds of debt It was one of Morse’s most puzzling cases. That morning Rupert Thorndike, the autocratic CEO of Thorndike Oil, was found dead in a pool of blood on his bedroom floor. He had been shot through the head, but the door and windows were bolted on the inside and there was no sign of the murder weapon. Morse looked in vain for clues in Thorndike’s office.He had to take another tack. He decided to investigate the financial circumstances surrounding Thorndike’s demise. The company’s capital structure was as follows: †¢ 5% debentures: $250 million face value. The bonds matured in 10 years and offered a yield of 12%. †¢ Stock: 30 million shares, which closed at $ 9 a share the day before the murder. Yesterday Thorndike had flatly rejected an offer by T. Spoone Dickens to buy all of the common stock for $10 a share. With Thorndike out of the way, it appeared that Dickens’s offer would be accepted, mush to the profit of Thorndike Oil’s other shareholders[1].Thorndike’s two nieces, Doris and Patsy, and his nephew John all had substantial investments in Thorndike Oil and had bitterly disagreed with Thorndike’s dismissal of Dickens’s offer. Their stakes are shown in the following table: | |5% Debentures (Face Value) |Shares of Stock | |Doris |$4 million |1. 2 million | |John |0 |0. | |Patsy |0 |1. 5 | All debt issued by Thorndike Oil would be paid off at face value if Dickens’s offer went through. Morse kept coming back to the problem of motive. Which niece or nephew, he wondered stood to gain most by eliminating Thorndike and allowing Dickens’s offer to succeed? Help Morse solve the case. Which of Thorndike’s relatives stood to gain most from his death? Solutions THE SHOCKING DEMISE OF MR. THORNDIKEMinicase solution, Chapter 25 Principles of Corporate Finance, 9th Edition R. A. Brealey, S. C. Myers and F. Allen After the corpse was removed, police inspectors came to dust the bedroom for fingerprints. Morse knew they would find nothing. He walked down the marble staircase of Rupert Thorndike’s mansion and into the paneled library. He sat at a table in front of the fireplace, scarcely noticing the painting over it, Monet’s portrait of the legendary John D. Thorndike at Giverny. He turned on his laptop computer. Thorndike Oil had three classes of securities outstanding: $250 million of ebentures (face value), 30 million shares, and an issue of subordinated convertible notes. Morse had to calculate the change in the value of each security now that Thorndike was gone, and given the now near-certain acquisition of Thorndike Oil by T. Spoone Dickens. Table 1 reports Morse’s results. The notes summarize his reasoning. With Table 1 in hand, it was easy to calculate the increases in value due to the murder and resulting acquisition. Debt increased by 39. 5% of face value. Common stock increased by $1. 00 per share, and each convertible note increased from 103. 5% to 110% of face value (from $1039. 50 to $1100 per bond). Morse summed the gains to Doris, John and Patsy (see Table 2). Then he reached for his cell phone and dialed Chief Inspector Spillane. Thorndike Oil Table 1 Values of Thorndike Oil Securities Before and After the Murder | |Before |After | |Debt |$151. 25 million, |$250 million | | |60. % of face value |100% of face value | |Equity |$270 million, |$300 million, | | |$9 per share |$10 per share | |Convertible notes |103. 95% of |110% of | | |face value |face value |Notes 1. Debt, before: PV at 12% of the 5% coupon for 10 years, plus repayment of face value (100%) at year 10, is 60. 5% of the $250 million face value, or $151. 25 million. Debt, after: essentially risk-free. The debt will be repaid in short order and should trade very close to face value. The gain in market value is 1 – . 605 = . 395, or 39. 5% of face value. 2. Shares: Share price increases from $9. 00 to $10. 00. 3. Convertible notes: Conversion value before is 110 shares at $9 per share = $990 per $1,000 note. The bonds were trading at 5% over conversion value, or 1. 05? 90 = $1,039. 50. Note holders will convert prior to the takeover, receiving 110? 10 = $1,100. (If they don’t convert, they get only $1,000. ) In other words, the notes increase by 110 – 103. 95 = 6. 05% of face value. Thorndike Oil Table 2 Who Gained Most? (Figures in millions) | |Doris |John |Patsy | | | | | | |Debt |$1. 8 |0 |0 | | |(. 395? 4) | | | | | | | | |Stock |$1. 2 |$0. 5 |$1. | | |(1. 00 ? 1. 2) |(1. 00 ? .5) |(1. 00 ? 1. 5) | | | | | | |Convertible notes |0 |$0. 3025 |$0. 1815 | | | |(. 0605 ? 5) |(. 0605 ? ) | | |___________ |___ ________ |_________ | |Total |$2. 78 |$0. 8025 |$1. 6815 | ———————– [1] Rupert Thorndike’s shares would go to a charitable foundation formed to advance the study of financial engineering and its crucial role in world peace and progress. The managers of the foundation’s endowment were not expected to oppose the takeover. Finance Case Study INSTRUCTOR: Mr. Konstantinos Kanellopoulos, MSc (L. S. E. ), M. B. A. COURSE: MBA-680-50-SUIII12 Corporate Financial Theory SEMESTER: Summer Session III Case Study The Many Different Kinds of Debt (solutions) Konstantinos Kanellopoulos 22nd August 2012 CASE STUDY ON The many different kinds of debt It was one of Morse’s most puzzling cases. That morning Rupert Thorndike, the autocratic CEO of Thorndike Oil, was found dead in a pool of blood on his bedroom floor. He had been shot through the head, but the door and windows were bolted on the inside and there was no sign of the murder weapon. Morse looked in vain for clues in Thorndike’s office.He had to take another tack. He decided to investigate the financial circumstances surrounding Thorndike’s demise. The company’s capital structure was as follows: †¢ 5% debentures: $250 million face value. The bonds matured in 10 years and offered a yield of 12%. †¢ Stock: 30 million shares, which closed at $ 9 a share the day before the murder. Yesterday Thorndike had flatly rejected an offer by T. Spoone Dickens to buy all of the common stock for $10 a share. With Thorndike out of the way, it appeared that Dickens’s offer would be accepted, mush to the profit of Thorndike Oil’s other shareholders[1].Thorndike’s two nieces, Doris and Patsy, and his nephew John all had substantial investments in Thorndike Oil and had bitterly disagreed with Thorndike’s dismissal of Dickens’s offer. Their stakes are shown in the following table: | |5% Debentures (Face Value) |Shares of Stock | |Doris |$4 million |1. 2 million | |John |0 |0. | |Patsy |0 |1. 5 | All debt issued by Thorndike Oil would be paid off at face value if Dickens’s offer went through. Morse kept coming back to the problem of motive. Which niece or nephew, he wondered stood to gain most by eliminating Thorndike and allowing Dickens’s offer to succeed? Help Morse solve the case. Which of Thorndike’s relatives stood to gain most from his death? Solutions THE SHOCKING DEMISE OF MR. THORNDIKEMinicase solution, Chapter 25 Principles of Corporate Finance, 9th Edition R. A. Brealey, S. C. Myers and F. Allen After the corpse was removed, police inspectors came to dust the bedroom for fingerprints. Morse knew they would find nothing. He walked down the marble staircase of Rupert Thorndike’s mansion and into the paneled library. He sat at a table in front of the fireplace, scarcely noticing the painting over it, Monet’s portrait of the legendary John D. Thorndike at Giverny. He turned on his laptop computer. Thorndike Oil had three classes of securities outstanding: $250 million of ebentures (face value), 30 million shares, and an issue of subordinated convertible notes. Morse had to calculate the change in the value of each security now that Thorndike was gone, and given the now near-certain acquisition of Thorndike Oil by T. Spoone Dickens. Table 1 reports Morse’s results. The notes summarize his reasoning. With Table 1 in hand, it was easy to calculate the increases in value due to the murder and resulting acquisition. Debt increased by 39. 5% of face value. Common stock increased by $1. 00 per share, and each convertible note increased from 103. 5% to 110% of face value (from $1039. 50 to $1100 per bond). Morse summed the gains to Doris, John and Patsy (see Table 2). Then he reached for his cell phone and dialed Chief Inspector Spillane. Thorndike Oil Table 1 Values of Thorndike Oil Securities Before and After the Murder | |Before |After | |Debt |$151. 25 million, |$250 million | | |60. % of face value |100% of face value | |Equity |$270 million, |$300 million, | | |$9 per share |$10 per share | |Convertible notes |103. 95% of |110% of | | |face value |face value |Notes 1. Debt, before: PV at 12% of the 5% coupon for 10 years, plus repayment of face value (100%) at year 10, is 60. 5% of the $250 million face value, or $151. 25 million. Debt, after: essentially risk-free. The debt will be repaid in short order and should trade very close to face value. The gain in market value is 1 – . 605 = . 395, or 39. 5% of face value. 2. Shares: Share price increases from $9. 00 to $10. 00. 3. Convertible notes: Conversion value before is 110 shares at $9 per share = $990 per $1,000 note. The bonds were trading at 5% over conversion value, or 1. 05? 90 = $1,039. 50. Note holders will convert prior to the takeover, receiving 110? 10 = $1,100. (If they don’t convert, they get only $1,000. ) In other words, the notes increase by 110 – 103. 95 = 6. 05% of face value. Thorndike Oil Table 2 Who Gained Most? (Figures in millions) | |Doris |John |Patsy | | | | | | |Debt |$1. 8 |0 |0 | | |(. 395? 4) | | | | | | | | |Stock |$1. 2 |$0. 5 |$1. | | |(1. 00 ? 1. 2) |(1. 00 ? .5) |(1. 00 ? 1. 5) | | | | | | |Convertible notes |0 |$0. 3025 |$0. 1815 | | | |(. 0605 ? 5) |(. 0605 ? ) | | |___________ |___ ________ |_________ | |Total |$2. 78 |$0. 8025 |$1. 6815 | ———————– [1] Rupert Thorndike’s shares would go to a charitable foundation formed to advance the study of financial engineering and its crucial role in world peace and progress. The managers of the foundation’s endowment were not expected to oppose the takeover.

Tom from Canada vs Hoshi from Japan

Culture affects every aspect of a human life. It is also very important while making a managerial decision. The case presented in chapter 5 proves that being born in the Western or Japanese culture determines a lot our attitude to decision-making with all its consequences. According to the information included in the case, Tom is a Canadian manager, who makes decision on his own, without consulting in with his team. He presents very individualistic attitude. It is completely different as far as we consider Hoshi’s way of making decisions.He, on the other hand, spent a lot of time convincing people working with him to agree to the new inventory-control system. Hoshi is a collectivist-manager. Another significant difference between the two managers is that Tom was task-oriented and counted for a quick and positive result of his decision, for an achievement and maybe a promotion, without taking into consideration implications that it might have on his employees. Unlike the Canadi an manager, Hoshi paid more attention to the fact how his co-workers will get used to working with the new system.Joint decision making in the Japanese subsidiary had a severe implications for the performance. Unfortunately, it also turned out that just informing subordinates is not effective either. Each of the managers driven by attitudes characteristic of their cultural scripts and they did what they thought was the best for their subsidiaries. However, what would work best is a mix of these two. Tom and Hoshi would get better results if their had found a middle solution before making the final decision and introducing the new system.Tom should not have done the task rush. After being informed, employees were surprised and not really convinced about the idea. This fact should have already attract the manager’s attention so that he hires a coach just in the beginning. If the Tom’s behaviour was any more collectivist, perhaps he would not trust only his own knowledge but would also ask other competent people of his subsidiary on their opinion. Furthermore, Tom did not care enough about his team, he did not really notice the moment just before key employees handed in their resignations.As a result, as being too sure of the fact that what he does is right, he could not react properly while it was essential. Rational decision-making cannot be successful as long as we do not include the indispensable human factor. In my opinion, Hoshi’s biggest mistake was waiting for the consensus. It is obvious that the Japanese culture is much more collectivist that the Western one, nevertheless the role of the manager should always be the same – taking care of his/her subordinates on one hand and making final decisions in the right time on the other.Having consensus as a priority, Hoshi forgot about the task to do and he did not realize when the change was really important for the further operating of the subsidiary. He should have been the person, who despite discussion and egalitarism, regarding people’s and company’s needs do his job. Moreover, he should have also met Mr. Bortolo expectations, it means introducing the system in the reasonable time. The CEO of the company understood characteristics and culture differences and gave the managers choice.But it seems to me that Hoshi overstrained the possibility given and it led him to a failure. To sum up, both managers made some mistakes caused by their cultural scripts. Rush decision making as well as really slow decision making resulted in huge losses for the subsidiaries and for the company as a whole. If Tom and Hoshi exchanged their views, attitudes before and mix them, learnt something from each other, they could be both successful and satisfied with the results they could present.

Can u pls make up a title for me anything to do with marktering Literature review

Can u pls make up a title for me anything to do with marktering - Literature review Example In the earlier times, shop keepers were able to acquire a fair understanding of consumer behaviour because they sold their products directly to the customers. However, with the increasing growth in the size of firms, opportunities of direct contact with consumers have lowered. Increasingly, managers are investing more to gain an insight on consumer behaviour. As a consequence, business and academic researchers invest more resources in studying consumer energy for the improvement of businesses. One of the oldest models in regards to consumer behaviour is ‘stimulus-behaviour model’. The following model propagates that marketing and other stimuli influence the buyer’s black box, producing certain responses (The Institute for Working Futures, n.d.). The stimuli can be of two kinds. The marketing stimuli or the marketing mix consist of 4 P’s including product, price, place and promotion. Others include economic, technological, political and cultural stimuli. All these stimuli move through the consumers’ black box and help them to make the product choice, brand choice, purchasing timing and purchasing amount. Apart from this simplified model, several other models have been developed by the marketing scholars in the field of ‘consumer behaviour’. The most prominent models have been developed by John A. Howard and Jagdish N Sheth, Francesco M. Nicosia, James F. Engel, Roger D. Blackwell and David T. Kollat. The five stage model of buying process includes steps like recognizing the problems, searching for information, evaluating the alternatives, purchasing decision and post purchase behaviour of the consumers. After purchasing the products, the buyer is expected to feel some level of satisfaction or dissatisfaction regarding the product or service acquired. The number of organisational buying processes can be quite

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Environmental Ethics - Essay Example Additionally, Aristotle observes that ethical living calls for application of wisdom that depends upon the situation at hand rather than the mere application of the set laws. He referred to this kind of as practical wisdom or prudence which is different from the theoretical wisdom(Kamtekar, 2004). On the contrary, Friedrich Nietzsche looks at ethics as untenable phenomenon. Nietzsche argues that ethics is deleterious and can just be relevant in the case of the highest types of human beings (Katsafanas, 2011). This is because ethics requires a high degree of consequentialist perfectionism of good. One thing to note however is that Nietzsche is a not a critic of morality in totality. He for example agrees with the notion of a higher morality that informs the living of higher men both of which he attacks and praises. Nietzsche offers an analysis of the existing values in a way that appeals to some morality of some kind. Nietzsche advocates for similarity of all people, free will and transparency(Katsafanas, 2011). However, Nietzsche argues for the harm of the highest men while advancing the interests of the lowest men. Further, Charles Darwin brings about the concept of evolutionary ethics which has two broad perspectives of normative ethics and descriptive ethics. Regarding descriptive ethics, it consists of biological ethical approaches anchored upon the role of evolution in determining human behaviour and psychology. Darwinism ethics is based on the scientific aspects of ethology, socio-biology and psychology with a focus on explaining and understanding preferences of ethics or choices (Lillehammer, 2010). On the other hand, normative ethics of evolution depicts a more independent attempt to singlehandedly use evolution to justify ethics in a society. Descriptive evolutionary ethics delve on the beliefs and moral attitudes. The ethical underpinnings discussed on this ethical

The adherence of men with CHD to the medical regimen Research Paper

The adherence of men with CHD to the medical regimen - Research Paper Example This paper illustrates that evaluating organizational culture and its readiness often takes a multi-dimensional approach as displayed by the results discussed hereafter. Basically, the investigation focused on not only looking into organizational culture but also going a step further and evaluating barriers that could possibly impede implementation of projects. These included commitment of nursing staff, physicians, and the administration to Evidence Based Practice (EBP). Additionally, evaluated is the extent to which a critical mass of nurses with strong EBP and skills scored, alongside the extent to which staff nurses have proficient computer skills. Interestingly, the scores rated from mid-range to high. Such scores are important in implementations aimed at integrating clinical inquiry into initiatives aimed at achieving organizational efficiency. It is important to mention that clinical inquiry requires a sequential and sophisticated approach and hence the findings of the study a re critical to successful implementation. Physician commitments to EBP score and the extent to which a critical mass of nurses with strong EPB and skills scored were relatively high. This does not fall short of expectations given that physicians receive more specialized training and the same can be said about nurses with strong EBP and skills. Administration commitment to EBP indirectly impacts on EBP, which makes organizational culture and efficiency very crucial to successful implementation of EBP.... These included commitment of nursing staff, physicians, and the administration to Evidence Based Practice (EBP). Additionally, evaluated is the extent to which a critical mass of nurses with strong EBP and skills scored, alongside the extent to which staff nurses have proficient computer skills. Interestingly, the scores rated from mid-range to high. Such scores are important in implementations aimed at integrating clinical inquiry into initiatives aimed at achieving organizational efficiency. It is important to mention that clinical inquiry requires a sequential and sophisticated approach and hence the findings of the study are critical to successful implementation. Physician commitments to EBP score and the extent to which a critical mass of nurses with strong EPB and skills scored were relatively high. This does not fall short of expectations given that physicians receive more specialized training and the same can be said about nurses with strong EBP and skills. Administration com mitment to EBP indirectly impacts on EBP, which makes organizational culture and efficiency very crucial to successful implementation of EBP (White, 2010). The score recorded is relatively high (4) although not maximal. This can be attributed to training and adequate commitment towards implementation of the same. Similarly, nursing staff commitment to EBP and the extent to which staff nurses bear proficiency in computer skills scored relatively low at 3. This can mainly be linked to nurse’s attitude towards implementation of the same as well as their disinterest in gaining computer skills training. Therefore, improvement in this area tops the list of approaches that can help in incorporation of clinical inquiry into day-to-day