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Thomson One - Business School Edition - Walt Disney Prospectus - Essay Example

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Thomson One - Business School Edition - Walt Disney Prospectus

This is a type of debt whereby the investors are paid an interest rate for their money. This debt is different from others in that its interest rate resets after every four months. A company that offers this kind of debt has the right to sell bonds whose benchmark is different from those that are linked to the United States of America. Companies embrace this type of debt since they are able to hedge against risks related to interest rates and at the same time remain in corporates. Its main aim was to attract long term investors into buying the stocks. The company targeted both the existing as well as new investors. The fact that the debentures were offered as floating debt was one major factor that increased their marketability. The interest rates were to be offered in quarterly basis and this served to attract many people to buy the bonds. In addition, the bonds’ interests could be reviewed after every four months, a factor that could also increase its marketability. They were to be sold on the basis of shareholding. Those who already have shares at the company would fill an enrolment form to get the bonds at a minimum lower amount. Those who do not hold shares were also given a chance to buy the bonds but their minimum amount was set at a higher than the existing shareholders. 2) List the dollar amount of debt Disney proposed to sell to the public. Indicate whether this amount has increased or decreased from 2008 to 2010. Discuss some potential causes of this increase or decrease. At the time when Disney proposed to sell its debentures to the public, the amount to be sold was stated to be $1 billion (High Beam Business, 2013). The bonds were to be issued in the denominations of $2, 000. For the excess of $2, 000, there was to be issues of integral multiples of $1, 000. It is important to note that the proceeds that the company was to receive equalled $989, 760, 000 with the rest being commission to agents which was stated at the rate of 0.35% (High Beam Business, 2013). Between the years 2008 and 2010, the amount in dollars increased. There are a number of reasons that could have led to this increase. One of them is the fact that the company needed more money as the expansion plan changed as the business environment changed. In addition, the company’s profitability may have reduced due to the global economic crisis that hit most countries. This reduced the amount of profit that the company could have re-invested and hence it had to borrow more. 3) Determine the percentage of the sales price Disney nets after discounts and commissions. Indicate whether this amount as decreased or increased from 2008 to 2010. Discuss some potential causes of this increase or decrease For every sale of shares or any kind of securities including bonds and debentures, the company usually does not sell them directly. The securities are normally sold through a broker or an agent who has to be paid a commission. In addition, the company may opt to sell its securities at a discount or at a premium. Discounts are expenses to be charged on revenue while premium is recorded as an income. In the case of Walt Disney, the bonds were not sold at a discount. However, there was a commission fee that was pain to the agents who were selling the bonds on behalf of the company. As it has been mentioned earlier, the discounts/ commissions ...Show more

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Thomson One - Business School Edition - Walt Disney Prospectus 1) Indicate the type of debt did Disney offers to the public for sale and discuss the various approaches Disney incorporated to ensure successful marketability of these securities Walt Disney Company is an organization in the entertainment industry based in California…
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