Equity selling

Equity is available from two sources. First, the company can sell new stock which, if in the form of ordinary shares, carries no interest payment. Although this course appears cheap, its use for projects which do not increase earnings, at least to a compensatory level, is usually inadvisable. This leaves retained earnings as the most likely source of equity for the present project. 

The real estate market has changed to the extent that home ownership is not necessarily the best financial option. You may come out ahead by selling your home and renting either a house, apartment, or condo. This option frees all of your home equity for living expenses. 

The second real danger lies in exiting the acquired assets. Buyout firms are forced to sell portfolio companies at the end of the predefined limited lifetime of their funds. It is no secret that this has become more problematic in recent years and that the average retention time of assets has increased. In fact, relatively few have managed to successfully divest in the past few years and exiting portfolio companies is one of the top issues for private equity players operating in the chemical sector. 

Table 8-7. Tire Acquisition.Prices and Selling Prices of Products Required to Produce a 20 Percent Retum-on-equity for Five Tire Pyrolysis Units2 (dollars)...

The pinnacle goal of most preapproval regulatory submissions is the NDA. The NDA approval grants a practical license to manufacture and sell the product in the United States, significantly increases the equity value of the applying organization, and represents the culmination of the scientific process of discovery, testing, and development. 

To determine the required selling price of hydrogen, a cash flow analysis was performed using an after-tax internal rate of return (IRR) of 15%. Other major assumptions used in the analysis were equity financing for a 20 year plant life including two years of construction time, a 90% on-stream factor with 50% plant capacity in first year of production, 30% of capital investment is spent in the first year and 70% in the second year, a tax rate of 37%, and ten year straight-line depreciation. 

As the new product lines came on-stream, Lilly s top management decided to sell off its non-healthcare business. Not only were the profit margins lower, but, as one senior executive stressed, they demanded a disproportionate amount of management time. In 1988 Lilly sold its Elizabeth Arden Cosmetics to Faberge for 700 million. The following year its agricultural chemical business was turned over to a joint venture, DowBlcano, in which Lilly held 40 percent of the equity and Dow Chemical the rest (see Chapter 3). By 1991 Eli Lilly had 78 percent of its sales in pharmaceuticals (9... 

In the 1980s, however, Wellcome commenced a concentrated move into the new biological sciences and related technologies. To finance this step, in 1986 the Wellcome Trust offered 2 5 percent of its equity in the pharmaceutical enterprise to the public, continued to sell its shares publicly, and in 1986 sold off its animal health business for 65 million. These transactions funded research in herpes and AIDS therapy, as well as on tPA dissolvers of blood clots. Nevertheless, the Wellcome Trust recognized the fate of mid-sized... 

By then, Rabb had decided that nobody is going to make it alone. He and his board decided to sell to R Hoffmann-La Roche 60 percent of the company s equity for 2.1 billion, including 500 million in cash to help fund research and development on long-term products in Genentech s pipeline. The investment paid off, enabling Genentech to become a strong inte-... 

For natural gas at US 0.5/MM BTU, the feedstock cost element in the product is about US 5/bbl. The total fixed and variable operating costs are estimated at another US 6/bbl. The total required selling price will depend on fiscal regimes, debt/equity ratio, type of loans, corporate return requirements, the premium for the very good quality of the products etc. 

The two curves for cellulose alcohol represent the economics for 100% investor equity capital and for municipal bond financing. Also shown on the figure is the projected selling price for ethanol at 7% and 5% inflation rates. The cellulose alcohol curve with municipal bond financing shows the effect of interest losses prior to the first operating year. The third-year selling price is more representative of actual economics. 

The private a ct of economic life is captured fairly well by market analysis. The finance literature is replete with sophisticated models which would be useful to anyone contemplating buying into or selling out of corporate equity. The labor market literature offers a detailed treatment of the choice faced by a worker who must compare multiple job offers. 

Finally, Merton s model assumes that when the value of firm is lower than the value of debt, equity holders sell assets in order to fulfill their... 

The classic repo is the instrument encountered in the United States, United Kingdom, and other markets. In a classic repo one party will enter into a contract to sell securities, simultaneously agreeing to purchase them back at a specified future date and price. The securities can be bonds or equities but also money market instruments such as T-bills. The buyer of the securities is handing over cash, which on the termination of the trade will be returned to them and on which they will receive interest. 

Project financing in general reqnires fwo fypes of investors (a) fhe projecf sponsors who bnild and operate the system, sell the prodnct, and receive the profits and (b) lenders who provide the funds for construction and implementation, and receive interest on the money lent. The first types of investors are venture capitalists, the second, bankers and other financial institutions. The total investment consists of equity and debt. 

Options were originally written on commodities such as wheat and sugar. Today investors can buy or sell options on a wide range of underlying instruments in addition to commodities, including financial products such as foreign exchange rates, bonds, equities, and derivatives such as futures, swaps, and equity indexes. Contracts on commodities are known as options on physicals those on financial assets are known diS financial options. 

---