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You work for Netflix and have been asked to evaluate a potential acquisition of a smaller privately owned competitor. The acquisition candidate produces an EBITDA of 10% of Netflix's EBITDA and is offered to your firm at a price of multiple of 8 times EBITDA.
Assume the following: Current debt costs you 8% and you can raise additional debt at this rate today.
The loan is to be amortized over 7 years. Current return on equity is 15% Current WACC is 10% Tax rate is 30% (constant) 80% of the purchase price is considered depreciable assets - to be depreciated over ten years on a straight-line basis with no residual values. Residual value for this operation is to be 2x current EBITDA in year ten.
Create an after-tax cash flow analysis to answer the following: Economic analysis: is this a fundamentally sound investment? Using the tax cash flows and no debt (pure equity), is the prospect a positive NPV using ROE as the hurdle rate? Using the after tax cash flows and the firm's WACC, is this project desirable? Explain how you came to this conclusion.
Prepare a memorandum to me using the format -Issue and Authority - Your client, Professor Smith, obtained tenure and a promotion to full professor status many years ago.
What is the annual after-tax cost of debt to the company on this issue and how much must the assets be reduced to bring the TATO to the industry average - what is the project's IRR?
By examining the following two New Zealand tax cases discuss what guidance they provide to this complex area of tax law.
Congress increases the income tax rate from 20% to 30%. Record the journal entry Cole would make to adjust for this change.
How much should they save annually for the next three years if they want to build up Joseph's college fund to $20,000, assuming a 3 percent rate of return and ignoring taxes on the interest?
Are Shasta's employees required to include the value of the shirts in income?
This price includes the 6% sales tax and the 15% service charge. Sales tax is computed on the food plus the service charge. The service charge is computed on the food only. At what amount does Cuff price the food?
When was Tax Freedom Day in 2002 and 2003? What is Tax Freedom Day?
Compute Teppers 2013 cost recovery deductions related to the assets listed - Tepper reported taxable income
If the company requires a two-year payback period for its investment, would it undertake this project? Show your supporting calculations clearly.
ben grimm is a 40 partner in we four llc a super-heroing organization. he does most of the heavy lifting. reed has 40
Quarter-End Cumulative Taxable Income
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