Big City Trust Company.docx - Case Analysis Executive Summary The senior trust officer of Big City Trust Company Mr Samuel Cooper is scheduled to travel

Big City Trust Company.docx - Case Analysis Executive...

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Case Analysis Executive Summary The senior trust officer of Big City Trust Company, Mr. Samuel Cooper, is scheduled to travel to Halley, Nebraska with the agenda of spending several days with the people of Auto-Drive Company, who are on the process of perfecting some kind of automatic pilot designed for cars so that it would be impossible for cars to run into another car or to run off the road. Mr. Cooper would like the pension funds that Big City Trust managed to buy the Auto-Drive common in the event that Auto-Drive Company takes off because of its product. However, his concern lies on how much the stock can grow since how Auto-Drive would choose to finance the growth in sales would be significant and issuing numerous new stocks would cause a decline of the expanded earnings’ benefit. Thus, Mr. Cooper asked Mr. Richard Brainard to gather the financial statements of Xerox and Polaroid, who are both innovative companies like Auto-Drive, in order to summarize how the two companies financed their growth in the last four or five years. Knowing the possible options for funding the growth of Auto-Drive Company could help Big City Trust Company decide on whether they would invest on the former. Problem Institutional Since it would be a meeting between to companies, the Big City Trust Company and Auto-Drive Company, the senior trust officer from the former, Mr. Samuel Cooper has no power how Auto- Drive opts to finance the growth in sales before Big City Trust buys the latter’s common. He can only study the financial statements of other companies to analyze their funds requirements, so that he could go over some options for the management of Auto-Drive Company. However, the decision still lies with the latter, and there is still a possibility that they would go for issuing a lot of new stock, which might result in the dissipation of much the expanded earnings’ benefits. Operational Mr. Cooper considers the way the management of Auto-Drive might choose to finance its company’s growth. There is a possibility that Auto-Drive would prefer to issue a lot of new stock finance its growth, however the added shares of which would affect the benefit of expanded earnings.
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Corporate Objective The objective of Big City Trust Company through its senior trust officer, Mr. Samuel Cooper, is to have the pension funds management by the company to buy the Auto-Drive common just before the Auto-Drive Company’s product, the automatic pilot, is perfected and becomes a huge success. On the other hand, since the Auto-Drive Company is about to launch its product, the company needs to finance the growth in sales Areas of Consideration Environmental Opportunities & Threats Macro-Economic Indicators Political The automobile industry has been provided government support in the form of subsidiaries, among other things. The Auto-Drive Company can also foster international linkages by expanding its market overseas.
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  • Spring '12

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