In which foreign industry has privatization been most important?
The term privatization refers to the transfer of government or public-owned entities into the hands of private authorities for managing their operations.
Telecommunication is that foreign industry where privatization is considered most important because this industry includes critical and sensitive information.
In addition, private sectors run business operations with utmost discipline and provide efficient outcomes.
Question: The trustee in the bankruptcy settlement for Titanic Boat Co. lists the following book values and liquidation values for the assets of the corporation. Liabilities and stockholders’ claims are also shown.
Machinery and equipment
Building and plant
Liabilities and stockholder’s claims
First lien, secured by machinery and equipment
Senior unsecured debt
Total stockholder’s claims
Total liabilities and stockholder’s claims
d. After the machinery and equipment are sold to partially cover the first lien secured claim, how much will be available from the remaining asset liquidation values to cover unsatisfied secured claims and unsecured debt?
Question: Barton Simpson, the chief financial officer of Broadband Inc. could hardly believe the change in interest rates that had taken place over the last few months. The interest rate on A2 rated bonds was now 6 percent. The $30 million, 15-year bond issue that his firm has outstanding was initially issued at 9 percent five years ago. Because interest rates had gone down so much, he was considering refunding the bond issue. The old issue had a call premium of 8 percent. The underwriting cost on the old issue had been 3 percent of par, and on the new issue it would be 5 percent of par. The tax rate would be 30 percent and a 4 percent discount rate would be applied for the refunding decision. The new bond would have a 10-year life. Before Barton used the 8 percent call provision to reacquire the old bonds, he wanted to make sure he could not buy them back cheaper in the open market.
b. Compare the price in part a to the 8 percent call premium over par value. Which appears to be more attractive in terms of reacquiring the old bonds?
Question: The Bailey Corporation, a manufacturer of medical supplies and equipment, is planning to sell its shares to the general public for the first time. The firm’s investment banker, Robert Merrill and Company, is working with Bailey Corporation in determining a number of items. Information on the Bailey Corporation follows:
For the year 20X1
Sales (all on credit)
Cost of goods sold
Selling and administrative expenses
Net income before taxes
As of December 31, 20X1
Total current assets
Net plant and equipment
Liabilities and stockholders’ equity
Total current liabilities
Common stock (1,800,000 shares at $1 par)
Capital in excess of par
Total stockholder’s equity
Total liabilities and stockholder’s equity
a. Assume that 800,000 new corporate shares will be issued to the general public. What will earnings per share be immediately after the public offering? (Round to two places to the right of the decimal point.) Based on the price-earnings ratio of 12, what will the initial price of the stock be? Use earnings per share after the distribution in the calculation.
The Presley Corporation is about to go public. It currently has after-tax earnings of $7,200,000, and 2,100,000 shares are owned by the present stockholders (the Presley family). The new public issue will represent 800,000 new shares. The new shares will be priced to the public at $25 per share, with a 5 percent spread on the offering price. There will also be $260,000 in out-of-pocket costs to the corporation.
b. Compute the earnings per share immediately before the stock issue.
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