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

Evaluate the impact of monetary and fiscal policies, Evaluate the impact of...

Evaluate the impact of monetary and fiscal policies and the multiplier in achieving economic goals. 1. Summarize the articles with your own words, 2. Write a short explanatio

Prepare the consolidated statement, Power is a listed group reporting under...

Power is a listed group reporting under IFRS. The group was established when Power purchased an 80% of the ordinary share capital of Shuttle, a listed company, on 1 January 2009 fo

Determine the time zero value of the swap, You have been provided with the ...

You have been provided with the following information on a fixed-fixed USD-GBP currency swap, thespot exchange rate between USD and GBP, and the USD and GBP yield curves:

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

Explain the working capital management, Q. Explain the Working capital mana...

Q. Explain the Working capital management? Working capital management Working capital management is administration of current liabilities and currentassets.Effective ma

What do you meant by trade payable days, Q. What do you meant by Trade paya...

Q. What do you meant by Trade payable days? Year-end trade payables/Credit purchases (or cost of sales)x 365 days This is the length of time taken to pay suppliers. Ratio ca

The variance of the returns on rt inc. stock, Question If the economy b...

Question If the economy booms, RTF, Inc. stock is expected to return 10%. If the economy goes into a recessionary period, then RTF is expected to only return 4%. The probabilit

Working capital cycle for a trade, Working capital cycle for a trade ...

Working capital cycle for a trade Inventories days (time inventories are held before being sold)   +   Trade receivables days (how long the credit

Prepare a cash budget statement, Loudfire Safaris have requested you to pre...

Loudfire Safaris have requested you to prepare a cash budget for the period ending 31 March 2013. The following projections have been made for the next 4 months

Current ratio for a company, If current ratio for a company is equal to its...

If current ratio for a company is equal to its acid test (that is, quick ratio), then: A: The current ratio must be less than one. B: Working capital is negative. C: Trade

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