Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Butthole Industries is buying out Avengers, Inc. Butthole and Avengers both have market capitalizations equal to their fair value or the present value of their net cash flows. Butthole generates $45M per year in net cash flows but has no growth. Avengers is expected to generate $25M in net cash flows next year. Also, grow at 15% per year after. The return on capital of both companies over the past years:
Return on Capital
Butthole
Avengers
Year 1
-20.5%
45.8%
Year 2
41.1%
-5.8%
Year 3
10.5%
20.9%
Note that the relevant discount rate for each firm is the "average" return on capital.
A. If past history is a good indicator of future performance, what are the expected return on capital and standard deviation of return on capital for the merged entity?
B. In which of the two major dimensions this merger could possibly help Butthole: boosting the return or reducing the risk? Prove your point quantitatively.
Question 1: Consider a closed economy with no government sector in which consumption (C) is related to income (Y) by the equation: C = A + bY (a) What is the marginal pr
Q. Determine price level from the quantity theory of money? The price level The price level is determined from the quantity theory of money: P = (M.V)/Y
unplanned changes in inventory are counted as inventory spending by firms.say true or false and justify
Suppose that this year's the money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5trillion. a. What is the price level? b. What is the velocity of money
Summary of the cross model The below list summarizes the cross model and associates it to classical model: Labor Market: Real wages W/P is exogenous in cross model
What are forms of price floors to lead inefficiency? Price floors frequently lead to ineffectiveness in the forms of: a. Inefficient allocation of sales in between sellers
Suppose that the yield curve is flat at 5% per annum with continuous compounding. A swap with a notional principal of $100 million in which 6% is received and six-month LIBOR is pa
In the long-run framework, budget surpluses: A. should be run on a permanent basis since they boost saving and investment and stimulate economic growth. B. should be run whenever o
How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world, in
In a survey of 120 publicly-traded companies, the average price-earnings ratio was 18.5 with a standard deviation of 8.2. When testing the hypothesis (at the 5% level of significan
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd