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Suppose you buy a company which has $20 million of EBITDA for 5x EBITDA. You finance it with $30 million of equity and $70 million of debt. Five years later the company has $30 million of EBITDA and you sell it for the same EBITDA multiple you paid, 5x.
1. What is the IRR for your equity, assuming the interim cash flows all went to pay taxes, capex, etc. and not to pay down debt prior to the sale of the company.
2. What is the IRR for your equity, assuming the interim FCF was used to pay the debt down to zero?
What is the amount to use as the annual sales figure when evaluating this project?
Define covered call position Construct payoff and profit function and draw payoff diagram of covered call.
How we measure risk is related to our perspective. The president of the company would look at the correlation between projects which is measured by the correlation coefficient. The shareholder would measure risk by looking at Beta. While the project ..
You have just restated a set of financial statements to reflect impairing goodwill for a company that has no impairment charges in the last 10 years.
Sincere Stationery Corporation needs to raise $546,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with a 10.8 percent annual coupon rate and a 10-year maturity. The investors require a 7.2 percent rate of retu..
Problem Solving: Barnes Appliances has sales of $10,000,000, net income of 450,000, total assets of $4,000,000, and stockholders’ equity of 2,000,000. What is Barnes Appliances’ profit margin?
If the stock index is at 1,275.89 on the first payment date, calculate the net swap payment, indicating which party pays it.
Which of the following are true with regards to preferred stock?
A new issue of stock is expected to be sold for $98, with $2 per share representing the underpricing necessary in the competitive capital market.
what will be the value 4 months from now of a put option on the stock with a strike price of $33 and time to expiration of 6 months?
The discussion of EFN in the chapter implicitly assumed that the company was operating at full capacity. Often, this is not the case. For example, assume that Rosengarten was operating at 90 percent capacity. Thorpe Mfg., Inc., is currently operating..
Describe the money market approach, how it would work, and how much the firm ends up with
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