Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Valuing a Company with a Product Patent
Cyclops Inc., a high technology company specializing in state-of-the-art visual technology, is considering going public. While the company has no revenues or profits yet on its products, it has a ten-year patent to a product that will enable contact lens users to obtain maintenance-free lens that will last for years. While the product is technically viable, it is exorbitantly expensive to manufacture, and its immediate potential market will be relatively small. (A cash flow analysis of the project suggests that the present value of the cash inflows on the project, if adopted now, would be $250 million, while the cost of the project will be $500 million.) The technology is rapidly evolving, and a simulation of alternative scenarios yields a wide range of present values, with an annualized standard deviation of 60%. To move toward this adoption, the company will have to continue to invest $10 million a year in research. The ten-year
bond rate is 6%.
A. Estimate the value of this company.
B. How sensitive is this value estimate to the variance in project cash flows? What broader lessons would you draw from this analysis?
Cesar Digital Systems has EBIT of $500,000, a growth rate of 5%, and faces a tax rate of 40%. In order to support growth, Cesar must reinvest 50 percent of its EBIT in net operating assets. What is the value of the firm’s tax shield?
The firm has raised $8M by selling bonds at an average rate of 6%. What is the firm's cost of capital before taxes?
Which one of the following statements is true concerning the price-earnings (PE) ratio?
Why does the property tax, as implemented in the United States, provide a disincentive for property owners to improve their property?
What is the duration of assets that would be necessary to immunize the market value of equity from interest rate changes for this bank's portfolio holding the D1 constant and compute the slope of the Capital Market Line (CML) when the risk-free ra..
Explain why the market value of common stock often differs from its liquidation value or its book value. Why might an investor prefer a convertible bond over a regular bond? Why do investors pay attention to bond ratings and demand a higher interest ..
Hook Industries is considering the replacement of one of its old drill presses. Calculate the payback period of each press. Calculate the net present value (NPV) of each press. Using NPV, evaluate the acceptability of each press
The one year spot rate is 2%, the two-year spot rate is 3%, the three-year spot rate is 4% and the four-year spot rate is 5%. How many forward rates are there over the four-year period? Identify each forward rate with the symbol F which represents th..
Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $1,618,338, have a life of five years, and would produce the cash flows shown in the following..
You have been asked to determine which of the mutually exclusive projects your firm should undertake. The first one has a life of three years. It costs $150,000 and will generate cash flows of $70,000 per year. The other one has an investment of $715..
What duration (in work days) is erection estimated to take? - What duration (in work days) is dismantling estimated to take?
Describe the basic business of each of the following types of financial companies. Then explain why the firm in parentheses would want to operate as part of a financial holding company, or as part of a bank.
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd