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Essay / Research Paper Abstract
This 16 page paper is written in three parts. The first part examines the Cintas Corporation long term financing decisions, firm vlaue using book value, market vlaue and then loos at capital structure with consideration of Modigliani and Millar’s model. The second part fo the paper considers the use of risk assessment tools, including Black-Scholes model, Hedging, and scenario planning and ends by making an acquisition recommendation for Cintas, the recommended acquisitions Rite Aid, this is justified with an analysis and NPV calculation. The bibliography cites 3 sources.
Page Count:
16 pages (~225 words per page)
File: TS14_TEcintas.rtf
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Unformatted sample text from the term paper:
Cintas Corporation the most recent influential financing decision has been with the way existing funds were to be used with the implementation of a stick repurchase programme in the fiscal
year 2005. The board authorised the repurchase of shares up to the value of $500 million. Although this level of repurchasing was authorised only $154 was used with the
repurchase of $3.9 million shares at a market price of $39.27 on the 22nd of July 2005. There are many reasons why there could be a share repurchase scheme.
It is only stated in the accounts that this is for future provision for general corporate purposes. This may mean the shares could be used as security from borrowing, to
be used ion share purchase schemes, or more likely, potentially used as a method of making acquisitions. This gives the company more reserves, it is in effect changing one type
of asset for another that can be used when the opportunity arises, but the shares will not show in the balance sheet as an asset.
This was not the only decision that impacted on the capital structure, there was also the repayment of debt and as well as this there was also
an increase of $64 million short term debt, this was under the $300 million paper program that exists, here the borrowing was used to prevent the company having to liquidate
marketable securities which were close to maturity, the value of these was greater allowing them to mature as it would avoid early redemption penalties. However, this was not as major
as the share repurchase. If we look at the cash flow statement the changes of these and other investments or repayments sees a decrease in cash, the opening balance was
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