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Company A is considering the acquisition of Company B. B currently derives its sales from the US. A expects to create value by expanding B’s sales to Asia and expects the following improvements: Asian segment will create revenue of $400 one year after the acquisition, and is expected to increase at an annual rate of 4% in perpetuity. The pre - tax operating margin on the increased revenue will be 30%. Pre - tax operating margin = (Revenue-Cash costs/Revenue). It is anticipated that annual cash costs will be reduced by $600, starting one year after the acquisition, and the decrease will be perpetual. There will be no changes in capital expenditure or working capital . The tax rate is 25%, WACC is 9%. B’s pre-acquisition stock price (before any news of acquisition became public) is $75 and it has 200 shares outstanding. What is A’s breakeven price per share for B?
A Navy petty officer needs cash and goes to a paycheck advance company for some money. He/she agrees to pay $560 in two weeks (when his/her paycheck arrives) in exchange for $500 today. What is the interest rate implicit in this loan? Hint: This is a..
Construct a graph of the data that you will generate yourself. You are asked to create a plot of bank account balance vs time in days, assuming that on Day 0 the balance is $1000 and on Day 1 5.0% of the balance is withdrawn. Make a plot of balance v..
How much better off will you be at the end of 30 years if you decide to make the initial deposit today rather than 5 years from? today?
The family dollar company plans a $14 million expansion. The expansion is to be financed by selling $6 million in new debt and $8 million in new common stock. The before tax required rate of return on debt is 8% and the required rate of return on equ..
The shareholders of the Pickwick Paper Company need to elect eight directors. There are 200,000 shares outstanding. What is the minimum number of shares you need to own to ensure that you can elect at least one director if the company has majority vo..
You wish to purchase a 20-year, $1,000 face value bond that makes semiannual interest payments of $40. what price should you be willing to pay for the bond?
Cash flow from operations in a business is different than net income from operations in the same business. Discuss the difference in these two measurements of company activity. Which is most important to the business and why? What are the conseque..
Mall Toys Co. has a quick ratio of 2.00x, $32,175 in cash, $17,875 in accounts receivable, some inventory, total current assets of $71,500, and total current liabilities of $25,025. The company reported annual sales and cost of goods sold of $300,000..
Corp is considering the purchase of a new piece of equipment. what is the annual net income? Ignore income taxes.
A US Investor is considering investing in a security of a company in a developing-country. The country's market is characterized by infrequent trading, high inflation, large market volatility, low operating leverage, political unrest, low debt usage,..
All assets are depreciated using straight line method. Determine which setup should be chosen if the MARR for the firm is 10% and the marginal tax rate is 34%.
Felt water Furniture has 120,000 shares of stock outstanding. The firm expects to earn net income of $325,000 next year with annual increases of 3 percent per year thereafter. The firm also expects to pay out 75 percent of its net income in dividends..
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