User Account

All Pages

Calculate the annual debt-service payments required on debt

Assignment Help Finance Basics
Reference no: EM13891820

An all-equity financed company has a cost of capital of 10 percent. It owns one asset: a mine capable of generating $100 million in free cash flow every year for five years, at which time it will be abandoned. A buyout firm proposes to purchase the company for $400 million financed with $350 million in debt to be repaid in five, equal, end-of- year payments and carrying an interest rate of 6 percent.

a. Calculate the annual debt-service payments required on the debt.

b. Ignoring taxes, estimate the rate of return to the buyout firm on the acquisition after debt-service.

c. Assuming the company's cost of capital is 10 percent, does the buy- out look attractive? Why or why not?

Reference no: EM13891820

Questions Cloud

What role does shared risk contracting methodology play : Based on your knowledge of Accountable Care Organizations ("ACOs") offer your recommendation for the type of contracting would be most suitable. As you consider your recommendation from a 360 degree perspective, complete a SWOT analysis of your as..
What is comparative advantage : What is comparative advantage? Evaluate the major sources of comparative advantage. Select two major sources of comparative advantage and provide an example and explanation as to why each is a comparative advantage.
Design a verbal behavior change procedure : Design a Verbal Behavior Change Procedure
Determine the optimal product price inyen : For exchange rates varying from 70 to 130 yen per dollar, determine the optimal product price inyen and the profit in dollars. I need the information in excel and the varying currencies in excel slover
Calculate the annual debt-service payments required on debt : Calculate the annual debt-service payments required on the debt. Ignoring taxes, estimate the rate of return to the buyout firm on the acquisition after debt-service.
How does emtala apply in disaster situations? : How does EMTALA apply in disaster situations?
Does body weight have influence on blood cholesterol level : Does body weight have an influence on the blood cholesterol level? To answer this question what variables do you think the researcher would measure? Which would be the i.v. and which the .d.v.? Why?
Task performance and interpersonal relations : Analyse the Zellmer-Bruhn and Gibson article with regard to how the macro context in multinational organisations influences work team learning and how team learning influences task performance and interpersonal relations. What are the implications..
Calculate the investment internal rate of return and its npv : Prepare a spreadsheet to estimate the project's annual after-tax cash flows. Calculate the investment's internal rate of return and its NPV.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd