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Assume that a company is expected to produce EBITDA of $90M in perpetuity. The corporate tax rate the company is subject to is 35%. To maintain the existing production capacities, capital expenditures are expected to be at $10M per year, in perpetuity. Annual depreciation, expected in perpetuity as well, is $10M. The current risk-free rate is 3%, and it is expected to remain so in perpetuity. The company has $200M in long-term debt, which is considered by the bank to be risk-free, so the interest rate the firm pays on its debt is 3%. The company expects to hold that amount of debt in perpetuity. Using stock returns on a comparable company that operates in the same industry, and has debt outstanding equal to 40% of the market value of its total capital, analysts estimated that the comparable company’s beta is 1.8. The analysts believe the companies are comparable in all respects except for the capital structure, and do not expect that beta to change over time. You also know that the estimate of the market risk premium for the foreseeable future is 5%. Assume that the probability of financial distress for the firm is negligible, so that you can disregard it.
What do you expect the value of the firm’s equity to be if the company were to issue new debt and use the proceeds from this debt issue to repurchase equity? ________________
What price would the firm repurchase the equity at, assuming the firm has 90K common shares outstanding? __________________
Calculate the new, post-restructuring WACC.
Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.
In this essay, we are going to discuss the issues of financial management in a non-profit organisation.
Evaluate venture's present value, cash and surplus cash and basic venture capital.
This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?
Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.
In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).
Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.
Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.
How much will you have left over each half year if you adopt the latter course of action?
A quoted company is considering several long-term sources of finance for expansion into new foreign markets.
This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.
This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.
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