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SHBI-GB.7305 – Corporate Finance
发布时间:2023-08-04
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SHBI-GB.7305 – Corporate Finance
SUGGESTED STUDY QUESTIONS CASE MCI COMMUNICATIONS CORPORATION (1983)
1. What is the likely level of MCI’s external financing needs over the next several years? By how much could they reasonably be expected to vary? Why?
2. Critique MCI’s past financial strategy, giving attention to the types of securities on which it has relied. Why did MCI finance itself in the manner it did?
3. Based upon your analysis of the outlook for MCI and the competitive and regulatory evolution of the industry, recommend a capital structure policy for MCI and defend your proposal against plausible alternatives.
4. Assume that Mr. English, the MCI chief financial officer, has the following financial alternatives available to him as of April 1983:
(i) $500 million of 12.5%, 20-year subordinated debentures.
(ii) $400 million of common stock.
(iii) $600 million of 7.625%, 20-year convertible subordinated debentures with conversion price of $54 per share (i.e. each $1,000 bond would be converted into 18.52 common shares).
(iv) $1 billion of a unit package consisting of a $1,000 7.5%, 10-year subordinated debenture and 18.18 warrants, each entitling the holder to purchase one share of MCI common stock for $55. The warrants would be exercisable until 1988 and are callable. The exercise price of the warrants would be payable either in cash or by surrender of the debentures valued at their principal amount.
Which, if any, of these alternatives, would you recommend that Mr. English take? Why? In broad outline, what financing steps would you recommend he take over the next several years?