I have group presentation .. all what we have to do read the case and answer the questions..so my part in this presentation to answer question number 4 from the case .I have to write about the problem in the case .. and I think this is the problem :Price earning ratio of 11x was below market of 29XOne page for the question 4 and half page for the problem.
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20170429071511bookshelf_online__financial_management.pdf
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Case 35. DELUXE CORPORATION
1. What are the risks associated with Deluxe’s business and strategy? What
financing requirements do you foresee for the firm in the coming years? (Hint:
how will the risk factors affect the firm’s forecast presented in case Exhibit 4 and
the firm’s future need for funds?)
2. What are the main objectives of the financial policy that Rajat Singh must
recommend to Deluxe Corporation’s board of directors?
3. Drawing on the financial ratios in case Exhibit 6, how much debt could Deluxe
borrow at each rating level? What is the implied (or maximum) capitalization
ratio at each rating category? (Complete the worksheet “Analysis of Flexibility”
in the Excel template attached.) How would your results be different if the
“Downside EBIT” is used in your estimation?
4. Using Hudson Bancorp’s estimates of the costs of debt and equity in case Exhibit
8, determine the company’s weighted average cost of capital (WACC) in
worksheet “WACC” in the attached Excel template. Which rating category has
the lowest overall cost of funds?
5. Read the introduction of the FRICTO framework in case book pp.456-457 (i.e.,
Part VI of Case 32. Structuring Corporate Financial Policy). Based on the
FRICTO (flexibility, risk, income, control, timing and other) framework and your
analysis above, what should Singh recommend regarding:
•
The target bond rating
•
The company’s current debt level and level of flexibility
•
The mix of debt and equity
•
Any other issues you believe should be brought to the attention of the CEO
and the board
…
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