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

#title.health insurance., Ask Sita expects her future earnings to be worth...

Ask Sita expects her future earnings to be worth Rs. 100. If she falls ill, her expected future earning will be Rs. 25. There is a belief that she may fall ill with probability of

Is the investment attractive, During and economic downturn, we can acquire ...

During and economic downturn, we can acquire another company by purchasing its stock for $6 billion. The company is earning $700 million a year, which is available for dividends, a

ASSIGNMENT, I have an assignment I need help understanding how to do step b...

I have an assignment I need help understanding how to do step by step abouot predictability on excess returns

Theories of interest rate determination, Question 1: (a) Describe clear...

Question 1: (a) Describe clearly the main theories of interest rate determination. (b) Critically assess the relationship between interest rate and Money supply. Questio

Economy System, What are the four basic elements found in all economic syst...

What are the four basic elements found in all economic system?

Explain the theoretical impact on the risk discount rate, Question : A ...

Question : A proprietary life company issues only non-profit guaranteed growth bonds. The company invests only in equities with an expected return of 10% p.a, the risk free rat

Foreign direct investment project, The new investment has been under consid...

The new investment has been under consideration since the beginning of January 2008 when the new government of Gujistan first invited companies to submit their proposals to build a

International finance assignment, The table below shows the summary of Bala...

The table below shows the summary of Balance of Payments in New Zealand. Note: Net values are given as credits + debits with correct signs in the balance of payment table.

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

Differences in working capital for different industries, Differences in wor...

Differences in working capital for different industries   Manufacturing Retail Service Inventories Hig

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