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Southern Dental Care is considering purchasing a smaller dental clinic, named John Dental Practice. Analysts of Southern Dental Care project that the merger will result in incremental net cash flows of $1 million in Year 1, $5 million in Year 2, $10 million in Year 3, and $71 million in Year 4 (the terminal year of purchasing). Assume all cash flows occur at the end of the year. The acquisition would be made immediately, if it is undertaken. John Dental Practice's post-merger beta is estimated to be 1.5, and its postmerger tax rate would be 34 percent. The risk-free rate is 6 percent, and the market risk premium is 4 percent. What is the value of John Dental Practice to Southern Dental Care's shareholders? (Show your work step by step by providing Excel worksheets.)
Blue Dog Manufacturing Corp. just reported a net income of $11,000,000, and its current stock price is $23.00 per share. Blue Dog is forecasting an increase of 25% for its net income next year, but it also expects it will have to issue 2,100,000 new ..
You have $30,000 in a margin account, 60% initial margin required. Suppose you buy 1,000 shares of IBM, for $50/share. Assume no dividends, and that your borrowing rate is 6.4%. What is your percentage rate of return if, in one year, IBM stock is sel..
Values, Norms, and Attitudes Initial Post - Elaborate on how it would impact you and your family if you were going to work in a foreign country for 18 months or longer. Be sure to name the foreign country and be specific about at least three points o..
A project will produce an operating cash flow of $7,300 a year for three years. The initial cash outlay for equipment will be $11,600. The net aftertax salvage value of $3,500 will be received at the end of the project. The project requires $800 of n..
You are considering a 20-year, $1,000 par value bond. Its coupon rate is 9%, and interest is paid semi-annually. If you require an "effective" annual interest rate (not a nominal rate) of 10.59%, how much should you be willing to pay for the bond? Do..
An economist has concluded that, near the point of equilibrium, the demand curve and supply curve for one-year discount bonds can be estimated using the following equations: What is the expected equilibrium price and quantity of bonds in this marke..
A company has identified the following investments as looking promising. Each requires an initial investment of $1.2 million. Which is the best investment?
Year-to-date, Oracle had earned a −1.34 percent return. During the same time period, Valero Energy earned 7.96 percent and McDonald's earned 0.88 percent. If you have a portfolio made up of 30 percent Oracle, 25 percent Valero Energy, and 45 percent ..
During the year, Belyk Paving Co. had sales of $2,392,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,433,000, $435,800, and $490,800, respectively. In addition, the company had an interest expense of $2..
Is it possible for investors ever to require a lower rate of return on a company's equity than on its debt, assuming that the debt is in a junk-bond category of quality?
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 21 million. The cash flows from the project would be SF 5.9 million per year for the next five years. The dollar required ..
What methods of financing and which basic documents are uses to conduct international trade transactions? Explain?
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