Investment Decision Analysis
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In early 2002, General Electric (GE) announced that it was buying the BetzDearborn water treatment unit of Hercules, a company facing severe financial difficulties. While some transactions such as this use a combination of stock and cash (with the acquiring company taking on debt to finance the purchase), GE's financial situation made it possible for the company to purchase BetzDearborn for $1.8 billion in cash (Bowe, 2002, p. 16), assuming no new debt and issuing no new stock. BetzDearborn generates sales of $1.8 billion, which means that the cost to GE was only a 1.8 multiple of sales. These seem favorable terms to GE, but the benefit to Hercules is the immediate inflow of much needed cash to the organization.For Hercules, the deal was beneficial because it offered a significant cash infusion into a cash-strapped organization. Although it remains unclear whether Hercules will be able to survive even with the restructuring (and elimination of BetzDearborn from its operations), the transaction increases the likelihood that the company will be able to move forward.
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Some common words found in the essay are:
Electric GE, Reaction Reaction, PV Y1, Flow Analysis, D/V Rd, Total Y1, BetzDearborn GE's, Risk Premium, References Bowe, AAA S&P, bowe 2002, y2 4% $1928, change previous total, = -18 +, -18 +, y1 3%, y2 4%, 3% $1854, cost debt, change previous, y5 5% $2232, y3 5%, 4% $1928, y1 3% $1854, previous total,
Approximate Word count = 742
Approximate Pages = 3 (250 words per page)
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