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Essay / Research Paper Abstract
A 10 page paper discussing long term financing policy and capital structure, risk management policy and acquisition analysis at rail and shipping company CSX Corporation. The paper provides a view of the business environment at CSX in late 2004, reviews the results of its acquisition of Conrail and identifies Union Pacific as a potential acquisition target in the future. The theme of the paper is valuation analysis; it provides instruction for assessing conditions according to the Modigliani-Miller and Black-Scholes models but does not provide those calculations. Bibliography lists 10 sources.
Page Count:
10 pages (~225 words per page)
File: CC6_KSfinCSXcapStruc.rtf
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Unformatted sample text from the term paper:
1960, Harvards Theodore Levitt used the American rail industry as an example of what not to do. The article, "Marketing Myopia," was published again in 1986. Even a
generation later, Levitts (1986) observations still hold true. The message of that original article ultimately was that which spawned the "what business are
we in" question. Levitt (1986) explained that the railroads declined because they failed to understand the nature of their business, but it appears that CSX Corporation (NYSE:CSX), at least,
took Levitts message to heart. Originally only a rail company, CSX still operates rail transport, but it also is involved in tangential forms of transportation of goods as well,
forms that generally make use of CSXs rail transport capacity. The purpose here is to assess CSXs long term capital structure and consider several "what if" questions. 1.
CSXs Recent Growth By the time the Staggers Rail Act was enacted in 1980 (Millett and Esty, 1998), the railroads already had suffered
years of government regulation. Consolidated Rail Corporation (Conrail) took full advantage of being able to blame government regulation for its problems, though competitors had been able to produce much
more favorable business results. Though Conrail was not as profitable as its competitors, neither was it in particularly bad shape at the time
of its merger with CSX. The effect of deregulation was to allow railroads to eliminate unprofitable lines and to charge market prices for their services. Across the industry,
operating ratio "(defined as the ratio of operating expenses to operating revenues...)" (Millett and Esty, 1998; p. 2) fell from 93.3 percent in 1980 to 80.0 percent in 1995.
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