ABC Corp is buying XYZ Corp. A share of XYZ currently costs $19 with 200,000 shares outstanding. ABC has a share price of $25, with 200,000 shares outstanding. After the merger, the new firm with be able to reduce its net working capital by $ 750,000 and increase its EBIT by $300,000 per year for the next 30 years. The cost of capital for new firm is 18%. ABC will be pay $5 per share plus stock for XYZ.
a. What is the NPV of the Synergies of this merger?
b. How many shares of merged firm should ABC offer per share of XYZ if they want to offer XYZ 30% of the synergies?
In: Finance
In: Finance
You are the loan department supervisor for a bank. This installment loan is being paid off early, and it is your task to calculate the rebate fraction, the finance charge rebate (in $), and the payoff for the loan (in $). (Round dollars to the nearest cent.)
| Amount Financed |
Number of Payments |
Monthly Payment |
Payments Made |
Rebate Fraction |
Finance Charge Rebate |
Loan Payoff |
|---|---|---|---|---|---|---|
| $1,800 | 18 | $129.89 | 15 | $ | $ |
In: Finance
You are in charge of deciding whether or not to undertake a new project for your company. The marketing staff believes you can sell 95,000, 145,000, 135,000, 115,000, 98,000, and 75,000 units per year over the next six years, respectively. The variable cost per unit is $21.35. Equipment for production will cost $2.95 million and be depreciated on a five year MACRS schedule over the six-year life of the product. You can sell the equipment for $245,000 at the end of the project. Fixed costs are $1.25 million per year and net working capital equal to 20 percent of next year’s sales is required. The tax rate is 21 percent and the required return is 10 percent. What is the minimum price per unit necessary to accept the project?
*Please show excel formulas with answer*
In: Finance
Problem 5-19 Comparing Investment Criteria
|
Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for both products is 13 percent. |
| Project A: | Nagano NP-30. |
| Professional clubs that will take an initial investment of $570,000 at Time 0. | |
| Next five years (Years 1–5) of sales will generate a consistent cash flow of $205,000 per year. | |
|
Introduction of new product at Year 6 will terminate further cash flows from this project. |
| Project B: | Nagano NX-20. |
| High-end amateur clubs that will take an initial investment of $400,000 at Time 0. | |
|
Cash flow at Year 1 is $120,000. In each subsequent year cash flow will grow at 10 percent per year. |
|
| Introduction of new product at Year 6 will terminate further cash flows from this project. |
| Year | NP-30 | NX-20 | ||||
| 0 | –$ | 570,000 | –$ | 400,000 | ||
| 1 | 205,000 | 120,000 | ||||
| 2 | 205,000 | 132,000 | ||||
| 3 | 205,000 | 145,200 | ||||
| 4 | 205,000 | 159,720 | ||||
| 5 | 205,000 | 175,692 | ||||
| Complete the following table: (Do not round intermediate calculations. Round your "PI" answers to 3 decimal places, e.g., 32.161, and other answers to 2 decimal places, e.g., 32.16. Enter your IRR answers as a percent.) |
| NP-30 | NX-20 | ||||||
| Payback | years | years | |||||
| IRR | % | % | |||||
| PI | |||||||
| NPV | $ | $ | |||||
In: Finance
Problem 5-15 Profitability Index versus NPV
|
Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering investments in three different technologies to develop wireless communication devices. Consider the following cash flows of the three independent projects available to the company. Assume the discount rate for all projects is 12 percent. Further, the company has only $25 million to invest in new projects this year. |
| Cash Flows (in $ millions) |
| Year | CDMA | G4 | Wi-Fi | ||||||
| 0 | –$ | 6 | –$ | 19 | –$ | 25 | |||
| 1 | 10 | 17 | 23 | ||||||
| 2 | 6.5 | 32 | 37 | ||||||
| 3 | 3.5 | 25 | 25 | ||||||
| a. |
Calculate the profitability index for each investment. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| Profitability index | |
| CDMA | |
| G4 | |
| Wi-Fi | |
| b. |
Calculate the NPV for each investment. (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| NPV | |
| CDMA | $ |
| G4 | $ |
| Wi-Fi | $ |
In: Finance
Facebook has gone public by issuing equity. As an analyst for a bank, you've estimated that the company will have a Beta of 1.2. You know that Facebook just gave a dividend of $4.00 per share. You anticipate high growth of this dividend for the first few years. You predict that dividend will grow by 20% for three years. After that, you anticipate growth to be a more modest 5% per year. The risk-free rate is 2% and the average return of the market is 13%.
In: Finance
What is next year's dividend or D1 if the dividend growth rate in year 1 is 25%, in year 2 is 15%, and in year 3 is 10%. After year 3 the dividend is expected to grow at a constant rate of 6% indefinitely. The required return is 12% per year, while the current stock price is $27.94
In: Finance
QUESTION 29
The direct transfer of funds ______.
|
is very efficient |
||
|
increases the cost of obtaining funds |
||
|
is the best method to enhance economic growth |
2 points
QUESTION 30
The price of a bond with a par value of $1,000, 5% coupon, 10 years to maturity and a 3% yield to maturity is about ______.
|
$919.89 |
||
|
$1000.00 |
||
|
$1085.30 |
||
|
$1,170.60 |
In: Finance
Prepare a report for the management of Tesla Motors which critically examines how the adoption of a Balanced Scorecard approach could be used to measure the performance of the organisation
In: Finance
|
Braxton Corp. has no debt but can borrow at 7.6 percent. The firm’s WACC is currently 9.4 percent, and the tax rate is 35 percent. |
| a. |
What is the company’s cost of equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Cost of equity | % |
| b. |
If the firm converts to 25 percent debt, what will its cost of equity be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Cost of equity | % |
| c. |
If the firm converts to 50 percent debt, what will its cost of equity be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Cost of equity | % |
| d-1 |
If the firm converts to 25 percent debt, what is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| WACC | % |
| d-2 |
If the firm converts to 50 percent debt, what is the company’s WACC? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| WACC | % |
In: Finance
Sales/ total assets = 0.9, ROA= 14%, ROE= 20%
calculate the profit margin, liabilities-to-assets ratio, and debt-to-asset ratio if 60% of its liabilities are in the form of debt.
In: Finance
A firm is considering replacing the existing industrial air conditioning unit. They will pick one of two units. The first, the AC360, costs $26,373.00 to install, $5,025.00 to operate per year for 7 years at which time it will be sold for $6,819.00. The second, RayCool 8, costs $41,185.00 to install, $2,182.00 to operate per year for 5 years at which time it will be sold for $8,974.00. The firm’s cost of capital is 6.03%. What is the equivalent annual cost of the RayCool8? Assume that there are no taxes.
In: Finance
Darryl's Doughnuts currently has 1,532,948 shares of stock outstanding that sell for 5.14. Additionally,Darryl has issued 17,652 bonds, with a par value of $1,000. They currently sell for 98.6% of par.
What is Darryl's debt weight?
(Enter your answer as a percentage to 1 decimal place. ex: 12.3)
In: Finance
Problem 12-01
AFN equation
Broussard Skateboard's sales are expected to increase by 20% from $7.4 million in 2016 to $8.88 million in 2017. Its assets totaled $3 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 5%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.
$
In: Finance