edf40wrjww2CF_PaperMaster:Desc
MCI
CASE ANALYSIS:
PRESENTED: THURSDAY JUNE 15, 2006
MCI
CASE ANALYSIS
INTRODUCTION
MCI is at a critical point in their company history. After going public in 1972 they experienced several years of operating losses. Then in 1974 the FCC ordered MCI's largest competitor AT&T to supply interconnection to MCI and the rest of the long distance market. With a more even playing field the opportunities to increase market share and revenue were significant. In order to maximize this opportunity MCI required capital. Their poor financial performance required them to use less traditional instruments to obtain financing. The capital acquired supported their growth until they reached a level of profitability in 1978. Subsequently they continued to increase their net income and the quality of their balance sheet. With continued prospects for growth tempered with some regulatory uncertainty they need to determine their optimal financial structure for the future.
CAPITAL REQUIREMENTS
MCI's capital requirements for the next 3 years are x,y and z. (see exhibit A). These values are based on a number of different assumptions. (See exhibit B). The forecast is not without a level of uncertainty. Specifically there are regulatory decisions where the outcome is not clear at this time. This could impact profit margin plus or minus seven percentage points. (See exhibit c)
CAPITAL STRUCTURE
MCI current capital structure is x% debt and y% equity. Their key ratios are a, b, and c. Comparing to other firms in the utilities industry they appear to be underutilizing (debt/equity). (See exhibit D). Referencing the forecast there is expected to be an x% annual increase in net in ...