Report on Long-term Financing Policy and Capital Structure, Risk
Management Policy, and Acquisition Analysis (WAL-MART)
Using Wal-Mart in every section, please answer:
Section 1:
A. Identify the firm?s most recent long-term financing decision (e.g.,
debt, IPO, seasoned equity offering, secondary offering). Analyze the
economic, business, and competitive background in which the financing
occurred, and identify cost and risk trade-offs.
B. Identify your firm?s book value, market value, and levered value
according to the M&M model. For a 20 percent increase in assets,
perform a quantitative analysis and recom-mend the optimal capital
structure mix for your company. Your analysis should include an
estimation of that company?s cost of capital, price per share, and
market value of the firm.
C. Discuss what changes you think would occur to your finance policy
and capital structure if your firm was forced to consider
re-organization and bankruptcy strategies.
D. Assume that your firm will be investing in the global market. What
international invest-ment and financing opportunities would you
consider ? and why? Also, discuss foreign exchange risk and give an
example that analyzes how foreign exchange rates could cause a loss to
the firm.
Section 2:
Use the following list of risk management tools and describe the
circumstances under which they would be applied to the risk categories
of corporate (including risk associ-ated with acquisition analysis and
capital budgeting), economic, foreign currency, political, and other
relevant global business risks.
E. Black-Scholes options pricing model
F. Simulation analysis
G. Hedging
H. Feel free to add other tools that you find that are relevant to your
chosen company.
Section 3:
This will be a report to the board of directors that identifies a
synergistic acquisition candidate for your company.
I. This report should clearly identify the following:
1) Your proposed acquisition terms
2) Price
3) Financing
4) Potential negotiation strategies
J. Supporting financial data should include the following:
1) Price/earnings ratios
2) Book value
3) Current market value
4) Liquidation
5) Diluted price per share
6) Capital Budgeting tools (NPV, IRR, Profitablility
index, payback ? optional: Discounted Payback and Modified Internal
Rate of Return)
K. Discuss the general risks inherent in an acquisition strategy.
L. Discuss the specific risks that should be included in the quantitative
analysis. For exam-ple, what risk factors should be included in the
discount rate (sometimes known as the hurdle rate, or required rate of
return).
Note: Use MS ExcelŽ spreadsheets as support showing your computations
where applicable. |
