Rawhide Brewery Case Study Paper Example

Published: 2021-08-10 01:03:09
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George Washington University
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Case study
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The first proposal presented by Upson the CEO of tabby breweries suggested a five-year contract in which they would outsource its operations from Rawhide brewery at a fee. However, they would assure rawhide a minimum number of processed cases annually by Rawhide breweries. This proposal would increase the revenue made by Tabby brewery at a reduced expenditure. The second proposal, tabby, and rawhide would form a one business entity by the name Newco which would assume the ten-year bank loan from rawhide. In return, rawhide would own 5% shares of the new entity. In the same case, tabby would own the 95% shares of the new entity. At this new entity, both brewery companies would process their bottle cases at the same price. This means rawhide would also transfer its operations to the new entity but would have more authority in decision making than tabby breweries. However, there was a counterproposal by McAlpine which Rawhide and tabby would come into a contract to form Newco under proposal 2. In this counter-proposal, Rawhide would own 60% of the common shares while tabby owns 40% of the common shares. In this proposal, the decisions would be made by both companies but Rawhide would transfer the operations to Newco in the exchange of the 10-year loan plan where both companies would be guarantors.

The counterproposal by McAlpine would improve the debt-equity ratio for Rawhide by a great margin. Both tabby and rawhide would own the debt as per the contract under the newco agreement. This would spread the risks to both companies which reduce the debt loss by rawhide breweries. In the event of these three proposals, the counter-proposal is more suitable for the rawhide breweries since it does not lose its assets. At the same time, the company will be able to be offset the burden of loan payment which improves the debt equity. There is a high probability of adopting the counter-proposal by McAlpine since both h their companies benefit from the deal. The risk of being undercut by the competing company is minimal since all the key decisions will have to be agreed by both parties.

Quantitative Easing

The federal market committee, when they decided to implement quantitative easing assumed that it would have great impacts on the economy of the country. The first quantitative easing (QE 1) was carried out with implications of the same in mind. The federal market expected trough quantitative easing, they would create more employment opportunities since businesses end up with more money, and they can create more opportunities for Americans. They also expect to increase and encourage lending among people and businesses. Through money made by the quantitative easing program, Fed expected to increase more spending among people. This leads to business profit which leads to more job creations. This also stimulates the stock exchange market leading to the growth of the economy.

Quantitative easing improves the stock market exchange which leads to the rise of capital cost for companies. This is through reduced lending rates which trigger a rise in the purchases of a company's share capital. However prolonged quantitative easing may lead to the decreased cost of company's capital. In cases of good stock exchange market, there are more good company structures which promote the company assets. Quantitative easing is aimed at increasing the price of the stock of a company in the market.

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