The following information is for Disney since 2007 (in $million) 2007 2014 2008 2009 2010 2011 2012 2013 9,025 EBITDA 8,346 7,328 8,439 9,622 10,850 11,642 13,828 BIT 6,855 7,443 5,697 6,726 7,781 8,863 9,450 11,540 Interest expense 783 774 645 538 526 564 426 367 2,796 1,578 1,753 CAPEX 1,566 2,110 3,559 3,784 3,311 Dividends 644 671 655 662 766 1,092 1,342 1,525 Shares outstanding Dividends per share 1,823 1,897 1,800 1,962 1,818 1,762 1,800 1,700 0.35 0.35 0.31 0.35 0.4 0.6 0.75 0.86 Total Debt 12,927 15,102 15,446 14,880 12,704 14,265 14,612 14,580 Book Equity 37,385 39,759 30,753 32,323 33,734 37,519 45,429 44,958 From a cash flow perspective, show whether or not Disney can afford to increase their debt by $10 billion (to a total of $25.1 billion)? Discuss whether your recommendation to take on the debt change for an increase of $35 billion? 7. Assume management wants to make certain they can maintain capital expenditures at their average level over the past 3 years, even if future conditions should happen to lead to EBITDA to fall to the level of 2009 (the most recent recessions). Use the following information on average D/EBITDA and yields by credit rating to figure out the new credit rating and interest rate. Project the D/EBITDA ratio based on the most current data. As the computed D/EBITDA ratio is not going to exactly equal the average D/EBITDA by credit rating, use the credit rating whose ratio is the closest Assume corporate tax rate T, = 35%. Credit Rating A AA A B Avg. D/EBITDA 0.65 0.9 1.7 3.3 6.3 2.4 2.8% Yield 7.1% 9.1% 2.5% 3.1% 3.8% 5.3% B5 The following information is for Disney since 2007 (in $million) 2007 2014 2008 2009 2010 2011 2012 2013 9,025 EBITDA 8,346 7,328 8,439 9,622 10,850 11,642 13,828 BIT 6,855 7,443 5,697 6,726 7,781 8,863 9,450 11,540 Interest expense 783 774 645 538 526 564 426 367 2,796 1,578 1,753 CAPEX 1,566 2,110 3,559 3,784 3,311 Dividends 644 671 655 662 766 1,092 1,342 1,525 Shares outstanding Dividends per share 1,823 1,897 1,800 1,962 1,818 1,762 1,800 1,700 0.35 0.35 0.31 0.35 0.4 0.6 0.75 0.86 Total Debt 12,927 15,102 15,446 14,880 12,704 14,265 14,612 14,580 Book Equity 37,385 39,759 30,753 32,323 33,734 37,519 45,429 44,958 From a cash flow perspective, show whether or not Disney can afford to increase their debt by $10 billion (to a total of $25.1 billion)? Discuss whether your recommendation to take on the debt change for an increase of $35 billion? 7. Assume management wants to make certain they can maintain capital expenditures at their average level over the past 3 years, even if future conditions should happen to lead to EBITDA to fall to the level of 2009 (the most recent recessions). Use the following information on average D/EBITDA and yields by credit rating to figure out the new credit rating and interest rate. Project the D/EBITDA ratio based on the most current data. As the computed D/EBITDA ratio is not going to exactly equal the average D/EBITDA by credit rating, use the credit rating whose ratio is the closest Assume corporate tax rate T, = 35%. Credit Rating A AA A B Avg. D/EBITDA 0.65 0.9 1.7 3.3 6.3 2.4 2.8% Yield 7.1% 9.1% 2.5% 3.1% 3.8% 5.3% B5