# Mci Case Report Essay

1210 Words May 4th, 2015 5 Pages
Financial Strategy for Corporation

Case3
MCI Communications Corp., 1983

Estimation of external financing MCI requires until the end of 1987
MCI is the second-largest long-distance provider in the telecom industry of United States after AT&T. First of all, in this case we estimate external financing MCI requires until the end of 1987. Exhibit 9A provides the projected capital investment needs for the following year, so our group plug those data in Exhibit 3 corresponds to Funds from Operations and Use of Funds, then come up with the External Financing MCI needs from 1984 to 1987 by deducting the total Source from the total Use. By looking at each year’s needs, we noticed that the external
We then calculate each year’s default probability on the condition that previous year did not default. Cost of financial distress can be calculated using: COFD=(Direct cost*Firm value+Indirect cost*Book value of asset) *Default Probability.
By applying 15% as the indirect cost due to MCI’s high leverage ratio, multiplies the 117.2m total shares outstanding times \$47 stock price plus 500m debts, which represents the total firm value. For the direct cost part, we used 1.8% based on research for 1980s industrial average direct default cost, times the total book value of assets together with 500m debts. Then add up both direct and indirect cost and multiple by the default probability each year, which is the cost of financial distress for MCI. The last step is to discount each year’s COFD using 12.5% (rd) and totals everything up. Therefore the total present value of COFD is \$151.72. Moreover, because interest is tax deductible we use formula: Tax shield= interest expense*tax rate.
Finally we discount them back to 1983 and add them up. In addition, we use the same method to calculate original cost, which is COFD. Therefore total cost equals issuing debt cost (interest expense- tax shield+ cost of financial distress) minus original cost(cost of financial distress)+PV(principal). Net proceeds=500-Total Cost =\$99.33. Detailed calculation can be

## Related Documents

• ###### And the Fraud Continues Essay

Goodyear Aerospace and later worked as a contract manager at GED-Ltd, before joining MCI in 1992. During his employment at MCI, Pavlo worked in the carrier’s financial unit and was one of the group managers responsible for billing and collections for the carrier business segment. “In 1996, Pavlo began to perpetrate a fraud involving several MCI customers. When the scheme was completed; seven MCI customers had been defrauded over a six-month period, resulting in \$6 million being…

Words: 844 - Pages: 4
• ###### Essay about Mci Fraud

Case 1: The Fraud Continues July 17, 2011 Abstract Focusing on the internal control weaknesses that existed at MCI, which contributed to the commission of Walt Pavlo’s famous multi-million dollar fraud. Discussing the approach that should have been taken if fraud was suspected and applying one theory related to crime causation of this case. As well as critiquing the ethical behavior of Pavlo and MCI – discussing what actions could have been taken to prevent the crime. 1. Discuss the…

Words: 1962 - Pages: 8
• ###### Essay on Worldcom's Management Planning Function

was created with the help of Mr. Bernard Ebbers who was named CEO when the company went public in Aug. 1989 (WorldCom News, 2002). The company was well acquainted with Wall Street analysts and other investors, and in 1998, its \$40 billion merger with MCI became the largest in history at the time. A year later in June, he was listed by Forbes as one of the richest men in the US when the stock ran up to a peak of \$64.51 (WorldCom News, 2002). However, despite of all the success, the company came to a…

Words: 1360 - Pages: 6
• ###### Essay A Research Study On Traumatic Brain Injury

more repetitive TBI’s showed a fivefold prevalence of mild cognitive impairment (MCI) and a threefold prevalence of significant memory problems. MCI is considered for diagnostic criteria applied to older individuals exhibiting cognitive decline. Typically subjects scored low on formal neurological tests, yet have no exhibited a sufficient degree of impairment of decline in function to be diagnosed with dementia. MCI is a critical factor because it is “often conceptualized as a transitional state…

Words: 804 - Pages: 4
• ###### Essay Alzheimer 's Disease Is The Most Common Form Of Dementia

vascular disorder. It is common for most people to have a combination of different disorders. An example of this would be a person with Alzheimer’s and vascular dementia. Alzheimer’s Disease is the most common form of Dementia. It reports for roughly 60-80% of dementia cases. Alzheimer’s is a progressive disease where its symptoms will worsen over time. In the early stages of Alzheimer’s, individuals will have mild memory loss, but with severe and late-stage Alzheimer’s, patients will lose their ability…

Words: 1389 - Pages: 6
• ###### Essay Symptoms And Treatment Of The Renal System

Based on the age demographic of the case study patient, congenital renal diseases, diagnoses and treatments will be examined. Case Study The patient is a Caucasian female less than one year of age. For the purposes of this case study, two renograms, both with Lasix, conducted within two months of each other will be referenced. At the time of the first scan, renogram 1, (Reno1) the patient was 4 months old with a history of hydronephrosis. A dose of 1.4 mCi Tc99m Mag 3 was administered intravenously…

Words: 766 - Pages: 4
• ###### Worldcom Essay

WorldCom Case Study Update 20061 by Edward J. Romar, University of Massachusetts-Boston, and Martin Calkins, University of Massachusetts-Boston In December 2005, two years after this case was written, the telecommunications industry consolidated further. Verizon Communications acquired MCI/WorldCom and SBC Communications acquired AT&T Corporation, which had been in business since the 19th Century. The acquisition of MCI/WorldCom was the direct result of the behavior of WorldCom's senior managers…

Words: 1988 - Pages: 8
• ###### Jdkajdja; Djfjdd Essay

Q1-2 The split-off and spin-off result in the same reduction of reported assets and liabilities. Only the stockholders’ equity accounts of the company are different. The number of shares outstanding remains unchanged in the case of a spin-off and retained earnings or paid-in capital is reduced. Shares of the parent are exchanged for shares of the subsidiary in a split-off, thereby reducing the outstanding shares of the parent company.…

Words: 10003 - Pages: 41
• ###### Worldcom Creative Accounting Essay example

to advantageous position at the expense of others. Sometimes for investors taking a company’s financial statements at Face value can be ‘a recipe for disaster’. Reasons for creative accounting 1) Income smoothing. Companies generally prefer to report a steady trend of growth in profit rather than to show volatile profits with a series of dramatic rises and falls. This is achieved by making unnecessarily high provisions for liabilities and against asset values in good years so that these provisions…

Words: 4608 - Pages: 19
• ###### The Effects of a Bust Economy on Audit Risk Essay

appearance of a positive financial status, which sometimes leads to fraudulent activity. The affects of a declining economy predominantly affect inherent risk of the audit risk model because of the attraction to either inflate revenues or under report expenses to keep the company in a positive financial standing. Many high-tech related company’s experienced a devastating blow to their financials after the technology bubble burst of 2000, which was marked by two large fraud scandals. First, was…

Words: 862 - Pages: 4