plz answer E. F. G. with the following information

e. HCA is the largest private operator of health care facilities in the world with hundrd of facilities in over 20 states. In 2006, private equity buyers took the company private in a $31.6 billion acquisition. In broad terms how costly do you think financial 2 distress would be to HCA if it began to appear the company might be having difficulty servicing its debt? Why? 13 f. In late 2010 HCA announced an intended dividend recapitalization in which it would pay a $2 billion dividend to shareholders financed in large part by a $1.53 billion bond offering. At an interest rate of 6 percent, how would the added debt 14 have affected HCA's times-interest-camed ratio in 2009 15 g. Please comment on HCA's capital structure. Is its 2009 debt level prudent? Is it smart to add another $1.53 billion to this 16 total? Why, or why not? 17 a. What were HCA's liabilities-to-assets ratios and times-interest-earned ratios in the years 2005 through 2009 Dec09 Dec08 Dec07 Dec06 Dec05 Solution: Liabilities to Asset ratio: 1.37 1.42 1.43 1.48 0.78 Times interest earned ratio: 1.91 1.45 1.33 2.76 4.11 b. What percentage decline in EBIT could HCA have suffered each year between 2005 and 2009 before the company would have been unable to make interest payments out of operating earnings, where operating earnings is defined as EBIT? Percentage decline in EBIT: 47.7% 31.1% 25.0% 63.8% 75.7% c. How volatile have HCA's cash flows been over the period 2005 - 2009 Cash Flow Volatility: -33% 18% -38% 89% O d. Calculate HCA's return on invested capital (ROIC) in the years 2005 - 2009. ROIC: 6.59% 4.08% 5.26% 6.14% 9.65% 18 19 20 HCA INC ANNUAL INCOME STATEMENT (S MILLIONS, EXCEPT PER SHARE) S 21 22 Sales 23 Cost of Goods Sold 24 Gross Profit Dec09 30.052 $ 24,826 5.226 Dec08 28.374 $ 24,023 4,351 Deco7 26.858 $ 22.480 4.378 Dec06 25.477 $ 21.448 4.029 Decos 24.455 20.391 4.064 5 Depreciation 26 Operating Profit 27 Interest Expense 28 Non-Operating Income/Expense 29 Pretax Income 1.425 3.801 1.987 188 2.002 1.416 2.935 2.021 256 1.170 1.426 2.952 2.215 661 1.398 1,391 2.638 955 179 1.862 1,374 2.690 655 412 2,327 627 321 268 229 316 208 625 201 725 178 BO otal Income Taxes 31 Minority Interest 32 Net Income S 1.054 $ 673 $ 874 $ 1,036 $ 1,424 3 ANNUAL BALANCE SHEET $ S Dec09 312 s 3,692 802 1.771 6.577 Dec08 465 $ 3,780 737 1,319 6.301 Dec07 393 3.895 710 1.207 6,205 Dec06 634 $ 3,705 669 1,070 6,078 Dec05 336 3.332 616 931 5.215 34 ASSETS 5 Cash & Equivalents 36 Net Receivables 7 Inventories 8 Other Current Assets 9 Total Current Assets O Gross Plant, Property & Equipment 1 Accumulated Depreciation -2 Net Plant, Property & Equipment 3 Investments at Equity OT 24,669 13,242 11.427 23.714 12.185 11.529 22.579 11.137 11.442 21.907 10,238 11,669 20.818 9,439 11,379 853 842 688 679 627 166 L CA 100C A B D E F 321 229 208 201 178 31 Minority Interest 32 Net Income $ 1.054 $ 673 S 874 $ 1.036 $ 1.424 ANNUAL BALANCE SHEET $ Dec09 312 s 3,692 802 1.771 6,577 Deco7 393 $ 3,895 710 1,207 6,205 Dec06 634 $ 3,705 669 1,070 6,078 33 34 ASSETS 35 Cash & Equivalents 38 Net Receivables 37 Inventories 38 Other Current Assets 39 Total Current Assets 40 Gross Plant Property & Equipment 41 Accumulated Depreciation 42 Net Plant, Property & Equipment 43 Investments at Equity 44 Other Investments 45 Intangibles 46 Deferred Charges 47 Other Assets 48 TOTAL ASSETS 24.669 13,242 11.427 Decos 465 $ 3.780 737 1,319 6,301 23,714 12,185 11.529 842 1.422 2,580 458 1.148 24,280 22.579 11.137 11.442 688 1.669 2,629 539 853 24,025 853 1,166 2,577 418 1.113 24,131 Decos 336 3,332 616 931 5,215 20.818 9.439 11,379 627 2.134 2,626 83 21,907 10.238 11,669 679 1.886 2.601 614 148 23.675 159 22.225 846 1.460 293 1,415 586 1.484 49 LIABILITIES 50 Long Term Debt Due In One Year 51 Accounts Payable 52 Taxes Payable 53 Accrued Expenses 54 Total Current Liabilities 55 Long Term Debt 56 Deferred Taxes 57 Minority Intrast 58 Other L 404 1.370 224 1,912 3.910 308 1.370 190 1.981 3,849 2,007 4,313 1.868 3,376 1,825 3,895 24.824 26.585 27.000 1.008 2,825 995 2,890 28.115 390 907 1,936 938 2.612 9,889 830 828 1.920 A B D E F 3 Investments at Equity 4 Other Investments 5 Intangibles 8 Deferred Charges 7 Other Assets 3 TOTAL ASSETS 853 1.166 2.577 418 1.113 24.131 842 1.422 2,580 458 1,148 24,280 688 1.669 2,629 539 853 24,025 679 1,886 2,601 614 148 23,675 627 2,134 2.626 85 159 22.225 846 1.460 293 1.415 586 1.484 9 LIABILITIES 0 Long Term Debt Due In One Year 1 Accounts Payable 2 Taxes Payable 3 Accrued Expenses 4 Total Current Liabilities 5 Long Term Debt 56 Deferred Taxes 7 Minority Interest 58 Other Liabilities 59 TOTAL LIABILITIES 404 1,370 224 1.912 3,910 308 1,370 190 1.981 3.849 2,007 4,313 1.868 3,576 1.825 3,895 24.824 26,585 27,000 1.008 2,825 32.970 995 2.890 34,380 938 2,612 34.399 28,115 390 907 1.936 34.924 9.889 830 828 1.920 17.362 125 1 4 50 Preferred Stock 81 Common Stock 62 Capital Surplus 63 Retained Earnings 64 Common Equity 65 TOTAL EQUITY 66 TOTAL LIABILITIES & EQUITY 67 147 1 226 (9.213) (8.986) (8,839) 24.131 $ 155 1 165 (10.421) (10,255) (10.100) 24,280 $ 164 1 112 (10,651) (10,538) (10,374) 24,025 $ 4,859 4.863 (11,375) (11.374) (11.249) 23,675 $ $ 4.863 22.225