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Happy Times, Inc., wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $120 million and a YTM of 6 percent. The company’s market capitalization is $340 million, and the required return on equity is 11 percent. Joe’s currently has debt outstanding with a market value of $29.5 million. The EBIT for Joe’s next year is projected to be $13 million. EBIT is expected to grow at 10 percent per year for the next five years before slowing to 3 percent in perpetuity. Net working capital, capital spending, and depreciation as a percentage of EBIT are expected to be 9 percent, 15 percent, and 8 percent, respectively. Joe’s has 2.25 million shares outstanding and the tax rate for both companies is 38 percent. a. What is the maximum share price that Happy Times should be willing to pay for Joe’s? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Maximum share price $ After examining your analysis, the CFO of Happy Times is uncomfortable using the perpetual growth rate in cash flows. Instead, she feels that the terminal value should be estimated using the EV/EBITDA multiple. The appropriate EV/EBITDA multiple is 8. b. What is your new estimate of the maximum share price for the purchase? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Maximum share price $
Simmons Mineral Operations, Inc., (SMO) currently has 455,000 shares of stock outstanding that sell for $40 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: Determine the new number of shares outst..
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What is its YTM? - If the yield curve is a flat 3%, what is its Macaulay duration?- If the yield curve is a flat 10%, what is its Macaulay duration?
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You are going to borrow $440,000 for a term (number of years) corresponding to your age at a 5.50% interest rate. Calculate the following: The monthly payment. The total out-of-pocket cash you will spend to completely pay off the loan
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Find the future values of these ordinary annuities. Compounding occurs once a year. Round your answers to the nearest cent. Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent.
Find an article about all of the problems that occurred due to the failure of financial institutions to obtain and retain notes and mortgages, leading to the inability of financial institutions to foreclose on property
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To meet short term cash needs X inc is considering obtaining funding through advances against receivables. Total annual credit sales are 600,000, terms are net 30 days, and payment is made on the average of 30 days. What is the effective interest rat..
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