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NaviNow Company agrees to pay $20 million in cash to the four former owners of TrafficEye for all of its assets and liabilities. These four owners of TrafficEye developed and patented a technology for real-time monitoring of traffic patterns on the nation's top 200 frequently congested highways. NaviNow plans to combine the new technology with its existing global positioning systems and projects a resulting substantial revenue increase. As part of the acquisition contract, NaviNow also agrees to pay additional amounts to the former owners upon achievement of certain financial goals. NaviNow will pay $8 million to the four former owners of TrafficEye if revenues from the combined system exceed $100 million over the next three years. NaviNow estimates this contingent payment to have a probability adjusted present value of $4 million. The four former owners have also been offered employment contracts with NaviNow to help with system integration and performance enhancement issues. The employment contracts are silent as to service periods, have nominal salaries similar to those of equivalent employees, and specify a profit-sharing component over the next three years (if the employees remain with the company) that NaviNow estimates to have a current fair value of $2 million. The four former owners of TrafficEye say they will stay on as employees of NaviNow for at least three years to help achieve the desired financial goals. Should NaviNow account for the contingent payments promised to the former owners of TrafficEye as consideration transferred in the acquisition or as compensation expense to employees?
The expected return on the market portfolio is 15%. The standard deviation of return on the market portfolio is 12%. Beta of stock A is 1.2 and the standard deviation of return on stock A is 18%. What could be the expected return of stock A?
the final project for this module is a consultancy report to anthonys orchard an expanding apple orchard and
The lack of historical data makes it difficult to create a forecast and budget for a new company. Class, how many years of historical sales data do you think are necessary in order to create an accurate forecast of sales? Explain.
provide an example of a health care capital expenditure. why is the capital expenditure budgeting process important?
If assets are $ 40,000 and stockholders’ equity is $ 10,000, how much are liabilities?
You are developing a proposal to open three new mexican restaurants around the Metro Detroit area over the next four years. The project requires a purchase of $800,000 of equipment with a four year useful life and a book value of zero at the end of t..
Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $14 million, of which 80% has been depreciated. The used equipment can be sold today for $3.5 million, and its tax rate is 30%. What is the equipment'..
A fund manager has a well-diversified portfolio that mirrors the performance of the S&P 500 and is worth $510 million. The value of the S&P 500 is 1,700, and the portfolio manager would like to buy insurance against a reduction of more than 5% in the..
You have the following information on two firms, A and B. The market rate of return is 6% and the risk-free rate of return is 1 %. Find the required return to equity for each firm, based on the Capital Market Pricing Model. Find the overall market eq..
Everything else constant, the maximum expected loss ratio that would yield a profitable line after including investment income is $7,500. Everything else constant, the maximum expected loss ratio that would yield a profitable line after including inv..
A stock is expected to pay a dividend of $2.00 the end of the year (that is, D1 = $2.00), and it should continue to grow at a constant rate of 5% a year. If its required return is 13%, what is the stock's expected price 1 years from today?
Which two of the methods used to evaluate project, and used to decide whether or not they should be accepted, do you prefer as a financial manager? Explain why you decided on these two and not the others. List the perceived deficiencies of the four n..
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