Ust Inc Case Summary

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Whether you agree with this business or not; their product causes harm to the public. But, UST Inc. is the leading manufacturer in the moist smokeless tobacco industry, and is capable to increase high profit by using their low financial leverage (Exhibit 1). This company dominants market share by 77%, the firm is able to maintain their customers even when the firm increases their price on their products. UST is one of the most profitable firm in America, in addition Forbes recognize the firm by achieving return of capital of 92.1% was 20% higher than the 2nd ranked firm. The firm has built itself a strong brand over the years by providing premium brands. Yet, the firm market share eroded a proportion throughout the years and declining sales …show more content…
Due to the lack of scientific evidence linking to cancer but, the firm is still exposure to legislative and the environment. That being said, there is a demand to continue producing their products. Since, the tobacco industry is still bad guy in field; they had to sign an agreement to ban on advertisement in order to settle state Medicaid lawsuit in addition to restrictions that aim to youth exposure.
The standpoint of bondholders the only thing they care about is ability of UST to make interest payments and I believe if they can get the face value. The firm has high impact on the company’s business risk, such as sales growth, competitors in the market, loss of the market share, and last but not least legislative and the environment regulations.
UST moving forward with to raise of $1 billion to repurchase its stocks, sitting at a current price of $34.88. The firm has a market value of $6,470 and with a 185.5 million shares outstanding. The total shares of 28.67 million shares that firm is able to buy their stocks so, the now the new number of stock stocks outstanding is 1,568 million shares. Being stated from above, the new market value is $6,648 million. The changes of the new share price would be at $42.39 (Exhibit 3). I believe that the firm will be capable to make interest when they are due. Since they have strong position and net
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