CORPORATE FINANCE

Corporate Finance

Corporate Finance

For questions one and two below, computations should be made for the following three companies; Molson Coors Brewing Company (TAP), PepsiCo, Inc. (PEP), and Anheuser-Busch in Bev SA/NV (BUD).

For the three companies mentioned above discuss what you believe has been the decision making that was involved with dividends on common stock, i.e. what do you believe is the dividend policy for each company. Provide financial metrics that support your answer.

Answer:

Molson Coors Brewing Company (TAP): The dividend yield for the Molson Coors Brewing Company (TAP) is quite low in the past barely 2%. However its spectacular growth in recent years can increase the dividend for the coming years. as compare to PepsiCo the Molson stock is average. Its high yield is not as high as the other.

PepsiCo, Inc. (PEP): The dividend payment of PepsiCo in US dollars has increased per year since 2000 by 13.70%. The growth of 14% in distributions doubles the dividend payment every five years. If we go back to PepsiCo data, dating back to 1978, the company doubled its dividend on average every 6.5 years.

Over the past few years the dividend payout for the company has remained above 50% in 2008 only. A lower dividend payout ratio is always considered to be a plus point as it allows consistent dividend growth.

Anheuser-Busch in Bev SA/NV (BUD): The bud dividends are paid on annual basis. Annualized dividend is $ 1.5 where as the annual dividend yield is 1.91%, payout ratio is 35.14%. Dividend growth from last year is 32.11%.

A short distance from Esplanade Mall is a parcel of land on which a townhome community was to be built. It appears that the project has come to a halt. You have been hired as a consultant to a group of investors who wish to consider purchasing the parcel of land and deciding whether to continue with the townhome project or to construct an office building. Discuss the issues that would need to be considered in making a decision on the investment project.

Answer:

Being a consultant to a group of investors wishing to purchase the land and to make investing decision regarding the townhome project or constructing office building, following issues will be considered and analyzed before making any decision.

Evaluate and analyze the financial condition in order to make an educated decision

Evaluate your risk tolerance level

Consider, analyze and evaluate the investment mix and invest in the project which is considered to be more profitable in future.

Creating an emergency fund

Considering dollar cost averaging

Considering rebalancing portfolio occasionally

Avoiding circumstances and incidents that can lead to fraud

The Saban Corporation is trying to decide whether to switch to a bank that will accommodate electronic funds transfers from Saban's customers. Saban's financial manager believes the new system would decrease its collection float by as much as five days. The new bank would require a compensating balance of $30,000, whereas its present bank has no compensating balance requirement. Saban's average daily collections are $10,000, and it can earn 8% on it ...