1) The risks that are associated with Deluxe’s business and strategy are that the company is in the

mature stage in its business lifecycle and they believe that the demand for their products will go
down as people are shifting towards new ways of transferring money including e-banking, atms
etc. The estimated decline in demand in 1-3% per annuum. The check printing market is very
concentrated due to which their can be a tough competition between the rival companies if
they disagree on the prices. Due to the business and technological risk faced by the company,
they believe that they should adapt to the new technological advancements and diversify their
core business, this can be risky for the business. The company’s working capital has been
constantly declining over the past few years, even though it is still positive, the declining trend
can be very risky for Deluxe in the coming years. The uncertaininty in the capital markets may
lead to a rise in the cost of capital for the company.
The largest financing requirements that I forsee for the company are related to their shift from a
purely printing company to one with a technological side as well. The company will have to
invest large amount of capital in assests, labor in order to diversify their core business, due to
which they will require large amounts of investments They can also buy-out or acquire other
companies already working in this area in order to grab the market share and also enhance their
capabilities in this field. The working capital has been declining for the company in the past few
years, because of which I believe they will be needed additional funds in order to pay off their
current/short term liabilities. Singh believed that the cash dividends would be kept constant in
the near future, which meant that the company may have to look for alternative ways of paying
these dividends with their current financial situation. The company has an A1 rating on short
term credit which can be used by them to access cash and debt at cheaper rates. The share
repurchases made by the company were also heavily funded by commercial paper and cash
from operations.
2) Rajat Singh believed that Deluxe’s financial policy would be able to help the company afford
fund when it is needed in order for them to have flexibility and continue surviving. Therefore,
the main objectives of the recommendations he makes to the board of directors must include
the following:
The core objective should be to increase the value of the firm and its financial flexibility. To
provide the company with an optimal capital structure that is beneficial for both the company
and the shareholders. The company should be able to leverage and use its place as the market
leader to enhance shareholder value.z The company should keep in mind that they have to
invest heavily in the technological sector to diversify their core business, for that they should
not only have enough reserves at hand but also enough room for capital acquisition through
debt or equity. They should come up with the amount of debt they can issue which will help
them improve their credit rating, and use that limit to issue debt in the future. They should also
weigh the cost of capital in order to maximize their tax benefit due to debt, but should also
ensure that their cost of debt does not out weigh the tax benefits that they may get. Since the
company will be requiring additional funds in the future, they should try to minimize their value
of WACC to raise funds at a lower cost.
3)