Mini Case

Richard Washington

FIN516

Week Two Mini – Case Assignment

January 22, 2013

What is the name of the company? The name of the company is Time Warner Cable. What is the industry sector? Time Warner Cable or TWC is a part of the CATV Systems industry, which is under the “Services” sector.

What are the operating risks of the company? There are several operating risks that TWC face. Among them is a slow economic recovery. If the economy were to further weaken, consumer demand for premium services, DVRs, and digital phone services will lessen. In addition, TWC is dependent on new subscribers in new subdivisions or multiple development units. If the number of occupied homes decline or the number of foreclosures increase, this would further reduce TWC’s ability to add new subscribers. Secondly, TWC relies on information and network systems. Any disruptions due to cyber-attacks, computer hacking, power outages and natural disasters will affect TWC’s ability to provide services. Lastly, TWC has substantial long-term debt. As of the end of 2011, TWC had incurred approximately $24M in long-term debt. A high amount of debt can limit TWC’s ability to take advantage of business opportunities and provide for capital investment needs. (http://ir.timewarnercable.com/files/doc_financials/Annual%20Reports/TWC_2011_Annual_Report.pdf)

What is the financial risk of the company (the debt to total capitalization ratio)?

Debt to total capitalization ratio = DebtShareholders'equity+Debt = $24,320$7,530+$24,320 = 76.3%

Does the company have any preferred stock? The company does not appear to have any preferred stock.

What is the capital structure of the company? Short term portion of Long Term Debt, Long Term Debt, Preferred Stock (if any), and market value of Common Stock issued and outstanding?

What is the company’s current actual Beta? The company beta is 1.

What would the Beta of this company be if it had no Long Term Debt in its capital structure? (Apply the Hamada...