The Deluxe Corporation case study solution contains two files, and Excel and Word file. The
Excel file has the financial analysis required for the paper in Word.
The solution is based on the following objectives:
1. Survey the determinants of corporate bond ratings, including profitability and coverage
ratios, as well as capitalization ratios as a measure of credit quality.
2. Explore the practical challenges involved in determining the optimal mix of debt and
equity. In particular, the case requires assessment of the trade-offs between the benefits of
the debt tax-shield and the costs of financial distress.
3. Consider the concepts of debt capacity and financial flexibility. (In this case, we
consider “flexibility” as the ability to access capital without falling below the company’s target
bond credit rating.)
The Deluxe Corporation solution answers the following questions:
1. What is the nature of Deluxe Corporation’s (Deluxe) business? Describe the firm’s
strategy and the risks the firm faces as a result of its strategy.
2. What are management’s motivations and key objectives in setting the firm’s financial
3. What financing requirements are foreseen for Deluxe in the coming years?
4. Using the data from Exhibit 6, calculate the amount of debt that Deluxe could borrow
under each debt rating. Calculate the debt-to-equity ratios under each ratings category. (This
would make for a good chart!)
5. Using Hudson Bancorp’s estimates of the costs of debt and equity in Exhibit 8, which
rating has the lowest overall cost of funds?
6. Do you think Deluxe’s current level of debt is appropriate?
7. What recommendations would you make concerning
1. Target bond rating.
2. Level of flexibility.
3. Mix of debt and equity.
|The cost of the Deluxe Corporation Financial Flexibility case study solution package (Excel and Word files) is
$39, and can be immediately downloaded after the purchase is made via the PayPal payment link below. If
you have any questions before purchasing, you can contact me via my e-mail address;
2001 Fiscal Year