FBE 432 - School Objectives and Problem Projects
J. K. Dietrich
Week 11 – November 4 and six, 2002
(1) Estimate the value of and interpret the sustainable expansion rate to get a firm
(2) Trace the implications on monetary policy of growth costs higher and lower than the sustainable growth rate for a firm
(3) Discuss the importance of financial flexibility and vitally assess the trade-offs from utilization of various financial options in implementing a firm's technique
Suggested Assessment Reading for next Category
RWJ, Phase 18
Concerns for Up coming Case (November 18, 2002*, Avon Products)
* Notice change in date in response to student choices
(1) Examine Avon's investment and loans decisions back in the 1980's. How come was Avon restructuring its business 23 years ago? Did the alterations make sense?
(2) Evaluate Avon's financial condition in mid-1988. So why was Avon reducing its dividend?
(3) What was the objective of the exchange offer?
(4) What payoffs does an Avon PERCS provide like a function for the future stock price? What specifically is encouraging this design? I marketability an issue?
(5) As in institutional investor possessing Avon inventory, how would you evaluate the tradeoff between accepting the new desired and keeping the common stock? Should you merely sell the most popular stock and ignore the offer altogether?
Paperwork: the Avon case can be an example of imaginative security design involving stuck options. Further more, the case provides new information into dividend policy and its role in a corporation's general business strategy. The case description of PERCA is certainly not completely clear and requires even more explanation: The exchange provide invites investors to tender up to 25% of common stock. PERCs pay $2 dividends per year, paid in quarterly installments of bucks. 50, pertaining to 13 quarters beginning Sept 1, 1988, and closing September 1, 1991. The normal stock compensates $1 dividends per year, as well in 13 quarterly payments. The payoff...