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The owners of Arthouse Inc., a national artist supplies chain, are contemplating purchasing Craftworks Inc, a smaller chain. Arthouse's analysts project that the merger will result in incremental free flows and interest tax savings with a combined present value of $72.52 million, and they have determined that the appropriate discount rate for valuing Craftworks is 14%. Craftworks has 8 million shares outstanding and no debt. Craftworks' current price is $16.25. What is the maximum price per share that Arthouse should offer?
One of the most important characteristics of getting a high sales price is high net revenue to working interest ratio. Why would a company looking to pursue an acquisition place high importance on this factor?
Winston Washers's stock price is $85 per share. Winston has $10 billion in total assets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 700 million shares of common sto..
Assume an investor purchases a 10-year, $1,000 bond with a coupon rate of 12 percent. The market rate almost immediately falls to 9 percent. What would be the percentage return on the investment if the buyer borrowed part of the funds with a 25 perce..
Suppose the spot price of gold is $1200 per ounce. The futures price for delivery in six months is $1208, while the futures price for delivery in one year is $1214. The interest rate on 6-month loans is 1.00percent (on an annual basis).
Sure Tea Co. has issued 6.8% annual coupon bonds that are now selling at a yield to maturity of 9.8% and current yield of 9.0492%. What is the remaining maturity of these bonds?
Your car dealer is willing to lease you a new car for $399 a month for 60 months. Payments are due on the first day of each month starting with the day you sign the lease contract. If your cost of money is 5.0 percent, what is the current value of th..
All of the following are true regarding a high quality balance sheet except:
Pangbourne Whit church has preferred stock outstanding. The stock pays a dividend of $8 per share, and sells for $40. What is the percentage cost of the preferred stock?
Firm A had net income of $30 milion last year. Deprecitation expense for year was $4million. Firm A spent $5 million last year in capital expenditures. If discount rate is 12% and firm A free cash flow is expected to grow 3% per year, calculate curre..
You are contemplating investing in a portfolio made up of two stocks, A and B. The beta of Stock A is 0.9, and the beta of Stock B is -1. Assume you plan to invest X% in Stock A, and the rest of your capital (that is, 1-X) in Stock B. What should X b..
We are examining a new project. We expect to sell 6,000 units per year at $74 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $74 × 6,000 = $444,000. The relevant discount rate is 18 percent, and th..
Your child’s orthodontist offers you two alternative payment plans. The first plan requires a $4,400.00 immediate up-front payment. The second plan requires you to make monthly payments of 144.14, payable at the end of each month for 3 years. What no..
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