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Blazer Inc. is thinking of acquiring Laker Company. Blazer expects Laker's NOPAT to be $9 million the first year, with no net new investment in operating capital and no interest expense. For the second year, Laker is expected to have NOPAT of $25 million and interest expense of $5 million. Also, in the second year only, Laker will need $10 million of net new investment in operating capital. Laker's marginal tax rate is 40%. After the second year, the free cash flows and the tax shields from Laker to Blazer will both grow at a constant rate of 4%. Blazer has determined that Laker's cost of equity is 17.5%, and Laker currently has no debt outstanding. Assume that all cash flows occur at the end of the year, Blazer must pay $45 million to acquire Laker. What it the NPV of the proposed acquisition? Note that you must first calculate the value to Blazer of Laker's equity.
JD Enterprises applies factry overhead based on dirct labor costs. The company incurred the following costs during 2003: dirct materials costs, $650000; direct labor costs, $3,000,000; and factory overhead costs applied, $1,800,000.
What are some typical types of transactions that appear in the financing section of the statement of cash flows?
Also explain how the cash budget can impact the timing of certain decisions such as when to invest in capital projects or seek additional financing.
Merchandise with a sales price of $460 is sold on account with term 2/10, n/30. What does the journal entry to record the sale include?
Evaluate the pros and cons related to an exclusion of a $250,000 gain for a primary residence and how using this residence as rental property could impact the gain or loss determination for the homeowner taxpayer. Recommend tax planning strategies..
What was the cost of advertising and warehouse expense allocated to each of the business based on the traditional method? What recommendation would you make in allocating these expenses to each of the business and how much would be allocated to eac..
Class, let's begin by discussing the internal control issues that are related to cash. What makes cash control different than control over any other asset?
Sam pays $10,000 for the business's goodwill and another $10,000 for the seller's covenant not to compete for the next five years. Compute Sam's amortization deduction for the year of purchase.
Suppose you are considering two possible investment opportunities; a 12-year Treasury bond and a 7-year, A-rated corporate bond. The current real risk-free rate is 4%; and inflation is expected to be 2% for the next 2 years, 3% for the following 4..
State law requires the depreciation be charged to principal. What part of the depreciation deduction will be allocated to Mark?
Jones, CPA, entered into a signed contract with Foster Corp. to perform accounting and review services. If Jones repudiates the contract prior to the date performance is due to begin, which of the following is false?
Identify several areas in business operations where weakness in control over data may occur. Then, determine which can do the most harm to the organization. Provide your rationale.
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