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The venture investors and founders of ACE Products, a closely held corporation, are contemplating merging the successful venture into a much lager diversified firm that operates in the same industry. ACE estimates its free cash flows that will be available to the enterprise next year at $5,200,000. Since the venture is now in its maturity stage, ACE's free cash flows are expected to continue to grow at a 6 percent annual compound growth rate in the future. A weighted average cost of capital (WACC) for the venture is estimated at 15 percent. Interest-bearing debt owed by ACE is $17.5 million. In addition, the venture has surplus cash of $4 million. ACE currently has five million shares outstanding, with three million held by venture investors and two million held by founders. The venture investors have an average investment of $2.50 per share while the founders' average investment is $.50 per share. A. Based on the above information, estimate the enterprise value of ACE Products. What would be the value of the venture's equity? B. How much of the value of ACE would belong to the venture investors versus the founders? How much would the venture be worth on a per-share basis? C. What would be the percentage appreciation on the stock bought by the venture investors versus the investment appreciation for the founders?
How to Finding dividend for Supernormal Growth and dividends are expected to grow at 35 percent per year during next 3 years
Debreu's pretax cost of equity is 9%. Its pretax cost of preferred equity is 7%, and its pretax cost of debt is also 5%. If the corporate tax is 35%, what is the weighed average cost of capital? Please show all work.
Gardial & Son has an ROA of 12%, a 5% profit margin, and a return on equity of 2-%. What is the company's total assets turnover? What is the firm's equity multiplier?
what rate of return should an investor expect to earn if he or she purchases these bonds? (Hint: If the coupon rate exceeds the YTM, Taussig would likely call the bond.)
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After spending $300,000 for research and development, chemists at Diversified Citrus Industries have developed a breakfast drink. The drink, called Zap, will provide the customer with twice the value of Vitamin C currently available in breakfast drin..
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Suppose your Customer, General Television, produces televisions and during the current year acquired Micro Engineering, Inc., which manufactured flat panel plasma screens for computers so that it could compete in the market for flat panel televisions..
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If the company does not consider real options, what is Project X's NPV? Round your answer to two decimal places. If the answer is negative, use minus sign.
Computation of future annual payments and how much income will the grandchild receive each year
Suppose that the expected returns of Jazz, Classical, and Rock are 10%, 6%, and 12%, respectively. An investor who has $10,000 wants to achieve an expected return of 40%. How much money should she invest in each stock and the risk-free security?
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