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Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn believes the acquisition will increase its total aftertax annual cash flow by $3 million indefinitely. The current market value of Teller is $55 million, and that of Penn is $85 million. The appropriate discount rate for the incremental cash flows is 10 percent. Penn is trying to decide whether it should offer 45 percent of its stock or $78 million in cash to Teller’s shareholders. a. What is the cost of each alternative? (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Cash cost $ Equity cost $ b. What is the NPV of each alternative? (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) NPV cash $ NPV stock $ c. Which alternative should Penn choose? Stock Cash
A firm is expected to pay a dividend of $1.45 next year and $1.60 the following year. Financial analysts believe the stock will be at their price target of $45 in two years. Compute the value of this stock with a required return of 11.4 percent.
What is the future value of $2,600 in 19 years assuming an interest rate of 7.9 percent compounded semi-annually? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Proficient-level: Compute the NPV statistic for Project Y and tell [advise] whether the firm should accept or reject the project with the cash flows shown in the chart if the appropriate cost of capital is 12 percent.
Zombie Corp. has a profit margin of 4.7 percent, total asset turnover of 2.1, and ROE of 19.24 percent. What is this firm’s debt-equity ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Debt..
Explain carefully the differences between marginal VaR, incremental VaR, and component VaR for a portfolio consisting of a number of assets?
How many tax returns do you prepare per year?- What type of software does your firm use to prepare returns?
Calculate total rentable area in the building as though it would be rented to one tenant.- Calculate the load factor and common area on the seventh floor only.
What is the total cash flow for Firm B: $55,000 net income, $5,000 depreciation, inventories increased by $10,000,
Given the following information, calculate the firm's WACC. rd=8%,D0=$2.00, Tax rate=40%, p0=$25, Growth=0%,flotation cost on common equity=15%.
Whitewater Co. is a U.S. company with sales to Canada amounting to C$8 million. Its cost of materials attributable to the purchase of Canadian goods is C$6 million. Its interest expense on Canadian loans is C$4 million. Given these exact figures abov..
Howard has received several verbal and written threats, and his house has been spray-painted with graffiti. The atmosphere has become so hostile that Howard has decided to sell his new home and relocate in a different city. Will he be eligible to exc..
Choose an index of potential derivatives instruments to include in portfolio. Write a short discussion of each instrument and the potential. Discuss each instruments and potential losses. Discuss the performance of instruments.
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