The Wm. Wrigley Jr. Company: Capital Structure Valuation and Cost of Capital Case Solution

In June 2002, a general manager of a hedge fund “active investor” taking into account the potential benefits of increased debt capitalization Wm Wrigley Jr. Company. Wrigley was conservatively financed, and the date of the event, carries no debt. Student work are: To estimate the potential value of re-using the leverage change Wrigley adjusted present value analysis;? Assess the impact on the weighted average cost of capital, earnings per share, the credit rating of the company and voting control of the Wrigley family? Examine the merits of a dividend or share buyback as a way to return cash to shareholders. The objective of the central teaching of the case is to explore the financial impact of the change in the capital structure. Key here is the compromise between the tax benefits of debt and the costs associated with the form of the financial difficulties and loss of flexibility. Issues include the indications for investors, the effects of customers (control considerations for the Wrigley family), and created incentives for managers and executives. Finally, comparing the case of dividends and repurchase shares.
by
Robert F. Bruner,
Carr are
Source: Darden School of Business
11 pages.
Date Posted: November 15, 2005. Prod #: UV1373-PDF-ENG
The Wm Wrigley Jr. Company: Capital Structure, evaluation and solution cost if capital

The Wm. Wrigley Jr. Company: Capital Structure Valuation and Cost of Capital Case Solution
Share This