Essay on Ust Case Solution
Higher leverage is very likely to create value for a firm considering capital structure change by exerting financial discipline and more efficient corporate strategy changes.
Before evaluating whether $1b is value enhancing in quantitative measure, ability to cope with pre-requisite interest payment and potentially dividend payment (possibly dividend growth maintenance) should be considered.
Required debt rate and pro forma income statement
Credit rating agencies take a wide range of factors – debt raising purpose, industry outlook, corporate profile and financial measures into account when performing corporate …show more content…
Alternative repurchase arrangements and evaluation
Alternative courses of action are proposed and benefits are weighed against their drawbacks or insufficiencies.
Firstly, different extents of repurchase - $500m and $1,500m, are considered. In the $500m case, UST is likely to obtain a credit rating of triple A due to EBIT and EBITDA interest coverage ratios, free operating cash flow debt coverage ratio, return on