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General electric wants to find the value of a japanese firm. pro-forma income statement is given below: (all yen figures below are in millions) Revenue Y 100 Costs Y(76) Depreciation Y(4) Interest Y(1) Pre-tax Y 19 After tax Y 11.40 it is expected that these cashflows will occur in perpetuity. further, the depreciation amount will equal the capital expenditures throughout in the future. unlevered cost of equity is 20% (in Yens). interest rate on debt is 10% (in Yens).
1. How much is the value of equity?
2. How much is the value of debt?
3. How much is the levered cost of equity (in Yens)?
4. How much is the WACC (in Yens)?
5. Assume a different capital structure with a larger debt amount, say 10 million Yens more than the amount assumed above. the firm value will increase by what amount?
Compute the Black-Scholes price for a call option with a strike price of $120, ?rst for a maturity of one year, and then for a variety of very long times to maturity.
What steps would you follow in order to take advantage of the following arbitrage opportunity (if there is one)? Security A costs $100 and pays $110 in 2 years. Security B costs $100 and pays $109 in one year. You know that in a year with $109 you ca..
Consider two stocks, Stock D, with an expected return of 18 percent and a standard deviation of 33 percent, and Stock I, an international company, with an expected return of 6 percent and a standard deviation of 21 percent. The correlation between th..
Suppose that the spot price of a non-dividend-paying stock is $60, risk-free rate of interest if 5% with continuous compounding. You enter a one-year long forward contract on the stock. What are the forward price and the initial value of the forward ..
Which of the following ratios is the coverage ratio?
Quantix Corp has shares with a beta of 1.3. The risk free rate is 3% and the expected market return is 9%. Its tax rate is 30%. The company's shares currently trade for $45 a share. What is the company's estimated cost of retained earnings?
Find the compound amount and the amount of interest earned by the following deposit $1000 at 0.81% compounded semianually for 3 years
An unlevered firm has expected earnings of $33,062.50 and a market value of equity of $287,500. The firm is planning to issue $50,000 of debt at 7 percent interest and use the proceeds to repurchase shares at their current market value. Ignore taxes...
Purchasing a Milling machine will cost $95,000. Installing the machine cost $15,000. Installiation and milling machine cost go together. Special tools that need purchasing cost $10,000. The Milling machine has a lifetime of 10 years. Determine the ca..
What is the approximate variance of returns for a security if the expected returns are -4.0%, 6.0%, and 15.0%, and the probabilities of occurring are 0.40, 0.30, and 0.30, respectively? A. 470 B. 63 C. 30 D. 961
A new 5-mile long elevated roadway is constructed to give a direct traffic route from major residential area over a swamp area to industrial complex of a city.
A comparable property sold for $5,000,000. The appraiser determined that the sale price included favorable financing from the seller worth $250,000. What is the indicated value of the subject property based on price per square foot? What is the indic..
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