Analysis of Ford's value enhancement plan
Ford's Value Enhancement Plan aims to align the interests of various shareholders by offering them different options - the choice of $20 in cash, additional new common shares or a combination of cash and new share. Based on the following analysis, Ford should go ahead with Value Enhancement Plan.
Characteristic of VEP
The Value Enhancement Plan has the feature of stock split and share repurchase.
Exchanging existing shares for new shares on a one-for-one basis, shareholders are also offered the option to reinvest $20 to receive additional new Ford common shares. In this sense, share price would decrease while the number of shares outstanding is going to increase. According to Ford's
…show more content…
Moreover, the effect of cash option is similar to that of share buyback, the number of new shares outstanding will reduce; thus, earnings per share will increase and it can increase the overall demand for Ford's share, which will benefit share price in the long run.
If shareholders elect stock option, they can increase voting power and exercise more control over the company. Also, as we discussed in the cash option, share price will increase, so, shareholders will benefit a lot from holding more new Ford shares.
As for the combination of cash and new shares, shareholders can take part of their money out of the stock to make other profitable investment, and they can also maintain their interest in the company. On the one hand, they can enjoy tax efficiency by paying tax of
capital gains for cash received, on the other hand, they can enjoy the profit when share price increases and they can have a say in the firm.
VEP is better than cash dividend in terms of tax effect, and compared with share repurchase, it meets shareholders' need to remain or increase control of the company.
Therefore, based on the analysis, Ford should go ahead with VEP.
Possible Choices of Different Shareholders
Ford family member will choose stock option because they want to expand their control in the firm. By supporting VEP, their 40% voting power remains unchanged but their equity in the firm decreases
Phyllis and Freddie can redeem the preferred shares at any time; the preferred shareholder still has control over the assets. If they qualify as a qualified Small Business Corporation, one can multiply the number of capital gains exemptions by increasing the number of taxpayers who are shareholders. In addition, Phyllis and Freddie can transfer the asset to the children to who they would like to appoint from their company. The growth in value of which will not be subject to a challenge of their Will under the Wills Variation Act. It can prevent future family disputes and help the estate equalization. When Phyllis and Freddie transfers the preferred shares to their children, it creates the commitment for the children to take over the ownership of the company. Phyllis and Freddie can also maintain control of the
When this brand reputation is combined with low priced cars, the sales revenues of Ford are likely to increase. The new cars should be fuel efficient. There should be cost savings for the customer both when the cars are purchased and when the cars are used.
If the owner of the company and to do the above mentioned, he will then be able to expand his company and hire more
I agree that Mr. Fields should be responsible to all the stakeholders’ interests in Ford when he makes decisions on what strategies to implement, and he should focus on making profits both in the short term and in the long term. In my opinion, he can also outline a clear road map for the next 5 (short-term) and 10 (long-term) years for Ford to ease the concerns of the stakeholders including stockholders, investors, and employees.
Tesla has been able through the past six years to keep a consistent long-term debt to equity ratio. However, Ford had a significant drop in 2010. They were experiencing such harsh negative numbers because of the losses in shareholders’ equity. From 2008 to 2010, Ford had losses within their shareholders’ equity account. This occurred because of the losses in AOCI they were experiencing.
Shared risk by is another advantage of selling common stock to raise funds for the business. If the business fails, you don’t have to give the money back to the
Profitability is a crucial element in determining the financial health of a company. The financial statement analysis is what allows the company’s managers to point the stability out of the company. This encompasses the income statement, the balance sheet, the cash flow, and the profitability and the liquidity ratios, which are established from December, 2012 until the third quarter (June to September), which means 5 years of ratio focus. These ratio analyses establish a company’s current financial health and potentiality; they also allow managers to compare the current and past performance of a company to identify and fix any given problem (Auerbach, 2016). Managers can decide in something for the company depending on the results of the ratios. Therefore, it can be said that Ford Motor Company is in good financial health as it is established in the results of its financial ratio analysis: the current ratio, the quick ratio, the return on investment ratio (ROI), the debt to equity ratio, the net working capital, and the strategic vision, the strategic objectives, the corporate strategy, the strategy implementation, and the evaluation and control.
–take the money raised from this sale and return it to shareholders (via special dividend or repurchase)
After it completes the share repurchase, the cash figure will decrease by SEK 4 billion and the market value of equity will decrease by SEK 4 billion.
In some of the scenarios shares of the company can be purchased by the employees and they can also become shareholders.
As the second largest automaker in US, Ford holds a strong position in home market. Their strong commercial vehicle sales helps generate higher revenue. Ford makes an effort to produce highly fuel efficient engines by improving existing engines rather than new hybrid engines. In result of this, the Ford Fiesta is currently ranked the lowest emitting mass produced car in Europe. In addition, Ford have a rather sound financial performance. The US government didn 't need to bailout and was the first to receive their investment status back. The firm’s profit margin is high compared to competitors with the highest liquidity ratio. When Allan Mulally implemented the “One Ford” approach, it significantly decreases costs for Ford and drives record profitability. By
The Corporate irrevocably starts to buy at a pre-agreed price the Musyarakah shares of the SPV with semi-annual basis and at the end of the fixed period the SPV would not have any shares anymore in the
On January 26th, 2007 Porsche will ask for the increase of the shares from the recent 27.4 % to
* Issuing new shares (crediting equity reserves) to the previous debt holders, preference shares holders, suppliers for accepting to restructure the debts.
of money can be made from the sale of shares to the public and because