Financial Case Report Business & Marketing Case Study (Case Study Sample)
Information about the Case Report
Case: Debt policy at UST Inc.
Your case report MUST be typed in MS document.
Feel free to make assumptions; justify your assumptions.
You report will be evaluated based on the following criteria:
• Frame the issue. Briefly describe that UST is planning to reverse a long-standing conservative financial policy.
• Evaluate the business risks of UST from the viewpoint of a credit analyst or potential bondholder.
• Discuss UST’s very profitable past financial performance. Is the past performance expected to continue in the future?
• Should UST Inc. undertake the $1 billion recapitalization? Calculate the marginal (or incremental) effect on UST’s value, assuming that the entire recapitalization is implemented immediately (January 1, 1999).
a. Assume a 38% tax rate.
b. Prepare a pro-forma income statement to analyze whether UST will be able to make interest payments.
• Assess the impact of the recapitalization plan on dividend payout.
• Summarize your conclusions.
Briefly describe that UST is planning to reverse a long-standing conservative financial policy
At end of 1998 financial year, UST had seven pending health lawsuits. Additionally, there is uncertainty that is enhanced by one of the lawsuit that stipulated UST had violated the advertising and antitrust laws. The company had also engaged in anti-competitive conduct. Further, in the same year November, the industry had agreed to settle the Medicaid lawsuit with 206 million dollars (Haevard Business School & Michell, 2000). The industry had also agreed to bad advertisements and promotions that appealed to the youths. UST is also a major played in the tobacco industry since it controls 77%. As a result, UST ended up expanding the category and also increased the prices of tobacco in the market. In the long run small players eroded the market share of UST. To solve these issues, UST. Inc. plans to make some changes.
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