What amount will the equity value of the combined company

Assignment Help Financial Accounting
Reference no: EM132869352

Question 1: ABC Inc. has a proposal for a purely financial merger with XYZ Inc. The current market value of ABC is $15 million, a standard deviation of asset-return of 56 percent, and zero coupon bonds of $6 million that mature in four years. XYZ Inc. has a market value of $6 million, a standard deviation of asset-return of 65 percent, and zero-coupon bonds of $2 million that mature in four years. The continuously compounded risk-free rate is 3.5 percent. By what amount will the equity value of the combined company change if the merger occurs and the asset return standard deviation of the merged firm is 45 percent?

Reference no: EM132869352

Questions Cloud

How much should be invested in risk-free asset to achieve : You want to build a portfolio with a beta of 0.98. How much should be invested in the risk-free asset to achieve a portfolio beta of 0.98?
What is the wacc for the firm for xyz inc : What is the WACC for the firm? The firm also has 1,850,000 shares of 4.45 percent preferred stock which carry an annual dividend of $4.45
Express your opinions about executive compensation : Express your opinions about Executive Compensation? Express you opinions about Unions and their impact on U.S. global competitiveness?
Calculate the cost of goods completed during april : Calculate the cost of goods completed during April and the cost of the ending work-in-process inventory
What amount will the equity value of the combined company : What amount will the equity value of the combined company change if the merger occurs and the asset return standard deviation of the merged firm is 45 percent?
Positive development for global economy : What actions can a multinational corporation take that would make globalization a positive development for the global economy?
What is the npv if the discount rate is thirteen percent : XYZ Inc. can reduce its operating costs by $162,500 every year. What is the NPV if the discount rate is 13.5% and the tax rate is 22 percent?
Which machine should abc purchase and why : Which machine should ABC purchase and why? Support your answer with numbers. You will not get any points if you just writing "Machine A" or "Machine B."
What is the internal rate of return : What is the internal rate of return (IRR) of the proposed investment for situations in requirement 1, parts (a) through (c)? Use the IRR builit-in function

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd