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Consider a conglomerate, non-synergistic, merger between two firms ABC and XYZ. In a purely conglomerate merger, the post-merger firm value is the sum of the two pre-merger values because there is no synergy.
ABC has a total current market value of $6 billion. ABC's capital structure is composed of common stock and a 5-year zero-coupon debt with a face value of $2.5 billion, and its Black-Scholes volatility (σ) is 35% based on the firm as a whole. XYZ has a total current market value of $5 billion and a 5-year zero-coupon debt with face value of $ 3 billion and Black-Scholes (σ) volatility of 45%. The risk-free rate is 5%.
(a) What are the current market values of debt and equity in ABC and XYZ?
a. Draw a cash flow timeline for 1 day's sales under existing credit policy b. What is the value effect (ΔZ) of this decision on 1 day's sales?
The stock of North American Dandruff Company is selling at $80 per share. The firm pays a dividend of $2.50 per share.
What are the three types of business failure? What is the difference between insolvency and bankruptcy? What are the major causes of business failure?
Predict the financial stability of the health care industry over the next three years. Provide support for your prediction.?
A perpetuity with the first annual cash flow paid at the beginning of year 4 is equivalent to receiving $100,000 in 15 years time. Assume that the perpetuity and the lump sum are of equivalent risk and that j2 = 11% pa is the appropriate interest rat..
Phil hunts on Roger's property without his knowledge or permission. Phil kills a deer on Roger's property.
The risk free rate is 3%, the market risk premium is 3.6% & the beta is 1.10. The market is at equilibrium, using the above information: What are the dividends 1 year from now?
1. Discuss Equity Market in Kenya. 2. Discuss Equity Market in USA 3. What are the Current Developments in Equity Markets.
Below is a scenario that can be answered using a direct email format. In the space below create the email (be sure to include an email address
A firm has preferred stock outstanding with a $1,000 par value and a $40 annual dividend with no maturity. If the required rate of return is 9%, what is the price of the preferred stock?
What type of current asset management strategy is the company pursuing? Explain why and what are the pros and cons of this strategy?
1. To protect significant revenue interests, both the Central and State Government want postponement of GST on 'petroleum products'. Justify the statement.
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