Bio Synthesis Essay

1824 Words Mar 7th, 2016 8 Pages
Swedish Match Case

1. The company will save 4.5%×4,000,000,000×28%= SEK 50,400,000 annually.

We assume the debt Swedish Match issues is a 10-year maturity coupon bond as the average BBB corporate bond (the CFO believes Swedish Match will receive a BBB+ rating) with the yield closest to that of Swedish Match’s debt is the 10-year maturity. Moreover, we do not assume that this debt will be refinanced into perpetuity because the financing decisions of Swedish Match are clearly dynamic - the board will only decide on the issuance of this one bond as the upcoming board meeting, not whether the fixed debt level will be maintained through refinancing once the proposed bond reaches maturity. Thus the value of the tax shield represents a
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We assume that the book values of all tangible assets are equal to their market values since we are provided with no information about their market values and, hence, attribute the difference between the market and book values of equity solely to the intangible assets of the company. The pre and post announcement market-value balance sheets are provided below:

Balance Sheet | Pre-Announcement | Post-Announcement | | Cash & Short Term Investments | $3,002 | $3,002 | | Current Assets | $4,884 | $4,884 | | PP&E | $2,712 | $2,712 | | Other Assets | $4,300 | $4,300 | | Intangible Assets | $23,394 | $23,793 | | Total Assets | $38,292 | $38,691 | | | | | | | Current Liabilities | $3,776 | $3,776 | | Total Interest Bearing Debt | $3,529 | $3,529 | | | Of Which: Long-Term Debt | $2,559 | $2,559 | | Other Liabilities | $2,533 | $2,533 | | Equity & Minority Interests | $28,454 | $28,853 | | Total Liabilities & Equity | $38,292 | $38,691 |

3b. After it completes the debt issuance, the total interest bearing debt figure will increase by SEK 4 billion and the cash figure will increase by SEK 4 billion.

Balance Sheet | Pre-Issuance | Post-Issuance | | Cash & Short Term Investments | $3,002 | $7,002 | | Current

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