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Hastings Corporation is interested in acquiring Vandell Corporation. Vandell currently has a cost of equity of 10%; 25% of its financing is in the form of 6% debt, and the rest is in common equity. Its federal-plus-state tax rate is 40%. After the acquisition, Hastings expects Vandell to have the following FCFs and interest payments for the next three years (in millions):
Year1 Year 2 Year 3
FCF $10 $20 $22
Interest expense 28 24 20.28
After this, the free cash flows are expected to grow at a constant rate of 5.4%, and the capital structure will stabilize at 35% debt with an interest rate of 7%. What is the horizon value, in millions, of unlevered operations?
IBM’s stock is currently selling at $ 11.44. This year the firm had earnings per share of $2.80 and the current dividend is $ 0.68. Earnings are expected to grow 7% a year in the foreseeable future. The risk free rate is 10 percent and the expected m..
Computing the present value of future dollars is known as:
Anna and mike are considering their life insurance options. They both make about 50,000/year. In the event that something happens to one of them, they figure they will need to cover the other persons salary at 80% for 10 years. what face value of lif..
Data for Dana Industries is shown below. Now Dana acquires some risky assets that cause its beta to increase by 35%. In addition, expected inflation increases by 2.40%. What is the stock's new required rate of return?
Recently, Google announced that it had closed the acquisition of Nest Labs, an thermostat and smoke detector startup, for $3.2B. Similar to when Facebook acquired Instagram and Whatsapp for $1B and $19B respectively, investors are questioning whether..
Suppose that General Motors issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. Assuming the yield to maturity remains constant, ..
What is an S corporation? What do you think is the reason for the 70 percent corporate-dividend exclusion? What are the differences between the operating income, capital gains income, and dividend income of a corporation?
Companies make bonds callable A. In the event interest rates increase. B. In the event interest rates drop. C. To protect the buyers of the bond in the event the company goes bankrupt. D. So the bond can be converted to common stock. E. A or B could ..
On a statement of cash flows of a financially healthy company, net income should ordinarily be:
Prepare a three-year horizontal analysis of the income statement and balance sheet of your selected company. Discuss the importance and meaning of horizontal analysis
Lucinda Lacy purchased a foreclosed house today for $105,500 by making a down payment of 15% of the purchase price and paying closing costs of: Determine manually (handwritten), by trial and error, Lucinda’s rate of return, if she owns the house for ..
The Aqua Liquid Assets Money Market Mutual Fund has a NAV of $1 per share. During the year, the assets held by this fund appreciated by 1.1 percent. If you had invested $15,000 in this fund at the start of the year, how many shares would you own at t..
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