The modern air/ground express industry was pioneered with the founding of Federal Express in 1971; the corporation was created in 1998 as FDX Corporation and became FedEx Corporation in January 2000 (FedEx, 2013).
FedEx provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services, offering integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. FedEx inspires its more than 290,000 employees to remain absolutely, positively focused on safety, the highest ethical and professional standards and the needs of …show more content…
RECOMMENDATION #3: Should the firm risk increasing their leverage (debt) to increase earnings and return on capital or keep the leverage the same (or even decrease it). If so, why and by how much.
Yes, FedEx should increase their leverage to increase earning because in the real world, where companies must pay taxes, leveraging a firm does create value because a firm can deduct interest payments against its corporate income taxes. Increasing leverage therefore creates tax savings and increases the value of the firm. FedEx managers should be cautioned that increasing leverage also increases risk. A highly leveraged firm may be overcome with debt and runs the risk of going bankrupt if it cannot pay off its debt.
Equity has a higher cost of capital, debt carries higher financial risk. As debt increases as a percentage of the company’s capital, leverage increases as well do as the chances of financial distress or default. Lowering financial leverage will absolutely lower the financial risk of the company; however, it may not lower the total risk.
RECOMMENDATION #4: Should they increase marketing spending? If so, by how much and where should it be allocated. Should online marketing spending and international marketing increase by more than print ads? Justify any additional spending that is recommended.
FedEx should increase its marketing spending by $200.5 million, with $125 million to be spent on advertising. When people need