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.
ACCOUNTING SYSTEM-EXAMPLE III Now suppose the Jam Co. manufactures some herbal chemicals and flavors which it sells partly to Extracts Co., partly to Bottling Co., some are co
Derivation of Indifference Curve: Consider any commodity bundle denoted by point A in the above figure which consist x 0 1 and x 0 2 amount of good I and good II respectiv
Why law of demand does not hold in pakistan
A, Explain how a person can be free to choose but his or her choices are casually determined by past event 2 B , Draw the casual tree for newcomb''s problem when Eve can''t perfe
If two countries had the same initial level of real GDP per capita, and Country A grows at 2.8 percent, while Country B grows at 3.5 percent, how will their real per capita GDP lev
Illustrate the aspect depends onto producers and consumers surplus. a. How much advantage do producers and consumers receive by the existence of a market? b. How is the welf
Tennis-Warehouse recently conducted a study of long distance phone calls made by its employees. The study showed that the length of the calls has a mean of 3.2 minutes, a standard
Consider an economy in which George and Harriet consume only ale and bread. George's utility function is UG = aG(bG- 1) where aG and bG are his consumption of ale and bread. Harrie
The managers of Firm A recommend that Firm A purchase Firm B because the purchase will diversify the business of Firm A. Diversification of risks is a desirable strategy for indivi
Importance of macroeconomics models Using the models we can, for example, analyze what happens when the government increases consumption, when the central bank increases the tar
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