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The second acquisition target is a privately held company in a growing industry. The target has recently borrowed $40 million to finance its expansion; it has no other debt or preferred stock. It pays no dividends and currently has no marketable securities. KFS expects the company to produce free cash flows of -$5million in 1 year, $10 million in 2years, and $20 million in 3 years. After 3 years, free cash flow will grow at a rate of 6%. The target's WACC is 10% and it currently has 10 million shares of stock outstanding.
(1) What is the company's horizon value (i.e., its value of operation at year 3)? What is its current value of operations (i.e., at Time 0)?
Why do you suppose the city hasn't attempted to "even out" the assets in the funds? Why does it not maintain funds for each of its major functional areas?
Purchased equipment paying $20,000 down and signed a noninterest-bearing note requiring the balance to be paid in four annual installments of $20,000 on the anniversary date of the contract. Based on Bright Light's 12% borrowing rate for such tran..
Variable costs as a percentage of sales for Leamon Inc. are 75%, current sales are $600,000, and fixed costs are $110,000. How much will operating income change if sales increase by $40,000?
Upon examining the balance sheet of a large city, you notice that the total assets of the general fund far exceed those of the combined total of the city's ten separate special revenue funds.
What are the accounting and reporting guidelines for a change in accounting principle related to depreciation methods?
John Smith started a consulting business and completed the following transactions. Prepare all journal entries related to these transactions.
What are the advantages and disadvantages of the computer-assisted audit technique known as parallel simulation?
The City of Greenville condemned 300 acres of Kayla's farmland. Kayla's land was worth $250,000 and her basis was $62,500. In payment to Kayla, the city gave Kayla 500 acres of similar land. An appraisal indicated that the land Kayla received was ..
I know that Eleanor will have a capital gain...but how does having the transaction qualify or not qualify for sale or exchange treatment affect Eleanor's capital gain?
The SEC's Enforcement Division investigates possible violations of securities laws, recommends SEC action when appropriate, either in a federal court or before an administrative law judge, and negotiates settlements.
Noell Corp. has common stock of $5,500,000, retained earnings of $3,000,000, unrealized gains on trading securities of $100,000 and unrealized losses on available-for-sale securities of $200,000. What is the total amount of its stockholders' equit..
A soft drink maker wants to expand into a neighboring country. They want the product bottled in that country to avoid political issues and to enhance the local image of the product.
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