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

Prepare a simultaneous equation model, Question : (a) Why OLS cannot ...

Question : (a) Why OLS cannot be applied in the presence of simultaneous equation bias? b) i) Prepare a simultaneous equation model for the supply and demand of dentist in

Financial Analyst, What is the relationship between overpopulation and unem...

What is the relationship between overpopulation and unemployment in a country?

What do you meant by equilibrium national income, Question 1: a) What ...

Question 1: a) What do you meant by equilibrium National Income and to what extent is economic growth beneficial to an economy? b) Explain using both diagrams and mathemat

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

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

You earn an effective annual return of 6 percent, You decide to max-out you...

You decide to max-out your annual investment into your Individual Retirement Account and invest $6,000 at the end of each year for the next 17 years. At the end of this investment

What do you meant by overtrading, Q. What do you meant by Overtrading? ...

Q. What do you meant by Overtrading? When a company is trading large volumes of sales very quickly, it may also be generating large amounts of credit sales and consequently lar

What are trade receivable days, Q. What are Trade receivable days? Year...

Q. What are Trade receivable days? Year-end trade receivables/Credit sales (or turnover)] * 365 days This is average length of time taken by customers to pay. A long average

APPLIED FINANCIAL ECONOMETRICS, Question 1 Suppose that you have 150 obser...

Question 1 Suppose that you have 150 observations on production (yt) and investment (it), and you have estimated the following ADL(3,2) model: (1 – 0.5L – 0.1L2 – 0.05L3)yt = 0.7

Risk, Hsve s Finsncial Econometrics project that needs to be done. It invol...

Hsve s Finsncial Econometrics project that needs to be done. It involves fitting AR(1)-Garch(1,1) model to two series of log returns and copulas, forecasting and Risk calculation

Determine average excess return, What do you notice about the alphas and be...

What do you notice about the alphas and betas calculated using the various methods? Using the alpha and beta you calculated for stock 4 along with the average excess return on 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