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Corporate Valuation, Capital Structure and Dividend policy - Essay Example

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Capital Structure and Dividend Policy [Instructor Name] Capital Structure and Dividend Policy Introduction For the purpose of this report, two companies have been chosen - Limited Brands Inc. and News Corporation. Limited Brand Inc…
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Corporate Valuation, Capital Structure and Dividend policy
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Corporate Valuation, Capital Structure and Dividend policy

News Corporation is one of the top television groups in the world. Its business includes the best broadcasting company of United States called Fox Broadcasting Company. News Corporation’s cable network programming segment produces and issues licenses for programming to be broadcast on satellite. In addition to this News Corporation is one of the best motion picture producers. Fox Filmed Entertainment is considered to be the market leader in the movie production and distribution (News Corporation, 2013). In this report, some of the strategic decisions made by the companies in the year 2012 and 2011, have been considered and their impact on profitability. Capital structure has also been discussed in detail as well as dividend policy (1)Business Decisions News Corporation In June 2012, the board of director of the New Corporation decided to operate with two specializes segments. One of the segments will focus on news, publishing and education and the other segment will focus on the media and entertainment. The company believes that they will be able to achieve the expected rate of growth with the application of this change. Return on assets measures which the profit in terms of total assets used by the business (Berman & Joe, 2008), for the quarter ended March 2012 was only 1.49% because the total profit was only $937 million and the total assets were $62,745 million. The profit was continuously declining and the company sustained loss of $1,553 million in the quarter ended June 2012. After this decision the profitability in both the quarter ended was improved. News Corporation enabled itself to achieve 3.56% returns on assets in the September quarter and this return further improved a bit in the last quarter and it reached to 3.79%. Market capitalization can be calculates by multiplying the number of outstanding share with the share price on a particular day (Francesco, 2007). The total number of outstanding shares is 1,584.5 million. Share price were increased from $19.71 per share to $25.51 per share in December 2012 which resulted in increased market capitalization. Market capitalization in March 2012 was $31,230.5 (1,584.5 million shares*$19.71) million as compare to the market capitalization of the $40,420 (1,584.5 million shares*$25.51) million in December 2012. News Corporation repurchased capital stock of $4.6 billion in the year ended June 2012. The company is planning to repurchase another $5 billion share from the market next year. This repurchase will definitely improve the profitability in the long. EPS will improve significantly together with ROCE. Since the capital employed will decrease by the heavy amount and there is no serious decline is expected in the profit. However, market capitalization will also decrease since the number of outstanding shares will decline. The company took initiative to make the growth rate faster. The major work was done on the Cable Network Programming. This proved to be the most important factor of the growth in 2011. Due to this growth the company was able to achieve growth of 22% in four quarters of the financial year 2011. This growth also resulted in higher earnings per share and high operating profit I every segment in 2011. Limited Brands The company repurchased shares amounting to $1.190 billion. Due to this repurchase the dividend per share was increased from $0.6 per share in 2009 to $3.8 per share in 2011. Earnings per share have also increased due to this reason. This repurchase has not ... Read More
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