Intercorporate investments, Financial Econometrics

Assignment Help:

Intercorporate investments:

DI has a 25% interest in a gold mine in the Yukon. They have held this investment for eighteen

months. During this time it has not made any money or discovered any gold. It was purchased as a long term investment by DI. This is especially frustrating to Dwight since he is unable to influence any of the decisions made by the mining company. The initial investment of 15 million dollars remains on the books unchanged. The company is still hoping for a major discovery, but regardless of that possibility, Dwight has made the decision to sell within one year. He is hoping that this potential discovery will increase the market value up from its present estimate of 9 million dollars.DI also owns 30 % of a hotel chain. The chain is modest, with three hotels across Ontario--but it has been profitable. The investment is carried by DI using the equity method--owing to the fact that Dwight sits on the Board. The carrying value of the investments is 4.5 million dollars, effective July/09, the last fiscal year end of DI. The hotel chain has a fiscal year end of December 31. In June of this year a major lawsuit was launched against the hotel chain. It is alleged that they were serving "mad cow" meat to the customers. Right now the suit is small; however, there is a major possibility of a class action suit. This could be as high as 15 million dollars. It is not known whether the chain is responsible. It is known that hundreds of its guests over the past six months did end up in the hospital. They have 2 million in liability insurance. They intend to fight this lawsuit--however, legal fees may also be in the millions. Further, they will have to undergo a major promotional campaign to offset the negative publicity surrounding this tragic event. DI has advanced 2 million dollars and has committed to another 2 million by December if needed. The initial 2 million was set up as a long term receivable by DI. Finally, in December of this past year DI purchased a 40% interest in a nearby amusement park called Crystal Lake. The amusement park was going through a restructuring and Dwight saw this as an opportunity to make some quick cash. It was his intent to hold the investment for less than one year. In fact his plan was to sell in early July/10--right at the peak of busy season. Unfortunately, the Company did not increase in value. Actually, DI's initial investment of 5 million was now worth half of that. Therefore, Dwight decided not to realize this loss. That is, he decided to make this a long term investment. Dwight was hoping that this loss was temporary and that by next year at this time it will have recovered and made a tidy profit.


Related Discussions:- Intercorporate investments

Inventory days, (Average inventory/Cost of sales) * 365 days Average inv...

(Average inventory/Cost of sales) * 365 days Average inventory can be arrived by taking this year's and last year's inventory values and dividing by 2 - (Opening inventories

Financial markets and institutions , I have a case study to do for my fina...

I have a case study to do for my financial markets and institutions subject. I''ve been struggling with one of the questions. So I need help if possible, the question is "What do y

Discuss the major risks in project, Determine whether the proposed investme...

Determine whether the proposed investment in Gujistan satisfies the investment criteria set by PASE plc. Also discuss the limitations of the criteria in the context of this project

Operating cycle, what is the applicability of an operating cycle in vegetab...

what is the applicability of an operating cycle in vegetable growing?

Foreign direct investment, PASE plc is a UK-based international energy comp...

PASE plc is a UK-based international energy company, which currently operates wholly-owned subsidiaries in Europe and North America. PASE plc's strategy is to generate future growt

Show example on aggressive working capital policy, Q. Show example on aggre...

Q. Show example on aggressive working capital policy? With an aggressive working capital policy, a company would hold minimal levels of inventories in order to minimise costs.

Describe the terms of the merger, Consider a recent merger between two majo...

Consider a recent merger between two major corporations. Describe the terms of the merger (cash or stock, premium, changes in management / directors, etc.). Explain the motivation

Effective yield to maturity, Research in Motion (RIM), once known as the gl...

Research in Motion (RIM), once known as the global leader in wireless innovation, has lost its darling status after the introduction of the Apple iPhone.  In 2011, RIM's stock pric

Calculate ads working capital cycle, Q. Calculate ADs working capital cycle...

Q. Calculate ADs working capital cycle? AD, a manufacturing entity, has the following balances at 30 April 2005: Extract from financial statements:      $000 Trade receiv

Reciprocal of inventory days, Inventory turnover is the reciprocal of inven...

Inventory turnover is the reciprocal of inventory days. (Cost of sales/Average inventory)x number of times This shows how quickly inventory is being sold. It illustrates the

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd