Reference no: EM132603507
Question - The following are the details of two potential merger candidates, Northrop and Grumman, in 1993. Northrop Grumman Revenues $4,400.00 $3,125.00 Cost of Goods Sold (w/o Depreciation) 87.50% 89.00% Depreciation $200.00 $74.00 Tax Rate 35.00% 35.00% Working Capital 10% of Revenue 10% of Revenue Market Value of Equity $2,000.00 $1,300.00 Outstanding Debt $160.00 $250.00 Both firms are expected to grow 5% a year in perpetuity. Capital spending is expected to be offset by depreciation. The beta for both firms is 1 and both firms are rated BBB, with an interest rate on their debt of 8.5% (the treasury bond rate is 7%). As a result of the merger, the combined firm is expected to have a cost of goods sold of only 86% of total revenues. The combined firm does not plan to borrow additional debt.
a. Estimate the value of Grumman, operating independently.
b. Estimate the value of Northrop, operating independently.
c. Estimate the value of the combined firm, with no synergy.
d. Estimate the value of the combined firm, with synergy.
e. How much is the operating synergy worth?
|
How much money must have in bank account today
: If the account pays 0.3?% interest per? month, how much money must you have in your bank account today to support your future? needs?
|
|
Find the depreciation expense for the long term assets
: Find the depreciation expense for the following long term assets - 11/10/18 - Bought 2007 Freight-liner ($21,000) 7 Years Residual Value: $5,500
|
|
Three points on continuum
: They can be seen as three points on a continuum. What, in your opinion, comes after knowledge on this continuum?
|
|
What would be the overall company operating income
: The management of Cook, What would be the overall company's operating income (loss) if the Eastern Division were eliminated?
|
|
Estimate the value of Grumman operating independently
: Capital spending is expected to be offset by depreciation. The beta for both firms is 1 and both firms are rated BBB, Estimate the value of Grumman
|
|
Compute the total advantage of using the new machine
: Madison Optometry, Compute the total advantage or disadvantage of using the new machine instead of the old machine over the next four years.
|
|
Disaster recovery plan
: Describe the key elements of the Disaster Recovery Plan to be used in case of a disaster and the plan for testing the DRP.
|
|
What amount will Owl credit to APIC-Common Stock
: In Owl's entry when its CEO exercises 1,000 options, what amount will Owl credit to APIC-Common Stock
|
|
Analyzing and visualizing data
: How do you think you can apply this chapter's concepts into your home, school, personal-life or work environment?
|