Case | HBS Case Collection | March 1992 (Revised November 1992)

Lockheed Aeromod Center, Inc.

by Timothy A. Luehrman

Abstract

A wholly-owned subsidiary of Lockheed Corp. has an $11 million expansion underway in South Carolina. The company must decide how best to take advantage of the opportunity to issue tax exempt debt. Specifically, the decision involves choices about the maturity and redemption structure of the proposed issue. Designed to let students isolate interest tax shields and subsidies, and to value these elements of a financing package separately, as part of an "adjusted present value" analysis.

Keywords: Business Subsidiaries; Decisions; Borrowing and Debt; Financial Strategy; Taxation; Opportunities; Expansion; Valuation; South Carolina;

Citation:

Luehrman, Timothy A. "Lockheed Aeromod Center, Inc." Harvard Business School Case 292-123, March 1992. (Revised November 1992.)