Debt Policy at UST Inc Case SolutionPosted by markwahl barg on May 30th, 2018 Debt Policy at UST Inc Case Solution UST, Inc. is definitely an very lucrative electric tobacco firm with low debt when compared with other firms inside the tobacco industry. The setting for your case is UST's recent decision to substantially alter its debt policy by borrowing billion to purchase its stock repurchase program. Excel CalculationsIncome Statement Projections- Actual 1998 and Projected 1999 Without Debt AAA Debt AA Debt BBB Debt Value of UST Under Varying Leverage Equity Finance, Leveraged Company Dividend Payment Under Varying Debt- 1998 and 1999 No Debt AAA Debt BBB Debt Questions CoveredWhat are the primary business risks associated with UST Inc.? What are the attributes of UST Inc.? Evaluate from the viewpoint of a bondholder. Why is UST Inc. considering a leveraged recapitalization after such a long history of conservative debt policy? Should UST Inc. undertake the 1$ billion recapitalization? Calculate the marginal(or incremental) effect on UST’s value, assuming that the entire recapitalization is implemented immediately (January 1st , 1999). Assume a 38% tax rate. Like it? Share it! More by this author |