HWK 14

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School

Oklahoma State University *

*We aren’t endorsed by this school

Course

3463

Subject

Finance

Date

Apr 3, 2024

Type

pdf

Pages

1

Uploaded by GeneralGalaxyAnteater15

Report
HWK 14: Designing and Equity Management System Spring 2022 Name_____________________: 1. Why do traditional open membership cooperatives need a system to redeem equity? - Due to the distribution of profits in proportion to use, there is no benefit to owning cooperative stock. Coop stock does not have a market nor is bought and sold, this makes it necessary for the coop to redeem the stock to show the value of the patronage distributed as stock. 2. Based on the case, what are some of the goals or desirable characteristics of an equity management system? - T o match the cooperative’s financial position, keep equity proportion to use, meet the lender's requirements, provide a good net present value to the member, and minimize estate settlements. 3. Based on the table from the Journal of Cooperatives how would a 10 year age of stock system compare with the cooperative’s current Age 70 system in terms of proportionality, member benefit and redemption budget? (It should be noted that the analysis is based on the current age profile of cooperative members. The Age 70 system likely had a much lower budget back with the cooperative was established.) - From year 10 to year 70 proportionality had decreased by 12%, member benefit grew by 5%, and redemption budget grew by 8%. 4. What system keeps equity the most proportion to use? Base capital plan 5. With an age of stock system what happens to proportionality and member benefit as the length of the revolving period decreases? What is the tradeoff in terms of the redemption budget? - Proportionality and member benefits all improve at the cost of a higher redemption budget. 6. Look at the mini- case “Designing an Equity Retirement Program” If you were Rick and Karla would you recommend that the cooperative change their equity management system? If so, what system would you recommend? - I would recommend the base capital plan, as it has many benefits also the change would just be a mindset change like they said, so that seems to be the simplest and most achievable.
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