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.
The Russell 2000 is a market index for small cap stocks - What do these changes in P/E ratios over last year tell you about current valuation in small caps and the different market
discuss the action the procurement function should take to achieve raw materials at economic cost durin inflation
Which of the following will decrease the nominal deficit? A. An increase in taxes. B. An increase in the debt. C. An increase in government expenditures. D. An increase in interest
Explain production as an income generating activity. What are the principal difference among government purchases of goods & service and transfer payments? Why are in
What are the comparative benefit The idea of comparative benefit defines that a nation must specialise in the industries in which it has a comparative advantage. Comparative be
Give examples of a monopoly and an example of perfect competition. Explain how each of your examples matches the textbook's definition of that market structure. Monopoly-a firm tha
Assume that the required reserve ratio is 0.12 for deposits & there are no excess reserves. Assume that the total demand for currency is equal to 0.3 times deposits. a) If t
The World Trade Organization is a successor organization to the A.United Nations. B.World Bank. C.International Court of Justice. D. GATT.
The United States postal service report 95% of first class mail within the same city is delivered within two days of the time of mailing. Six letters are randomly sent to different
When investment banks underwrite IPOs, they are typically sell stock for 5-10 percent more than they pay for it. When they underwrite stock for companies that are already public, t
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