Compute the value of hughes using the wacc approach

Reference no: EM13521880

In 1985, General Motors was evaluating the acquisition of Hughes Aircraft Corporation, and assumed that Hughes was of approximately the same risk as Lockheed and Northrop. Given the following information in the table, and also assuming that cash flows are perpetual, compute the value of Hughes using the WACC approach:
Firm βE D/E
GM 1.20 0.40
Lockheed 0.90 0.90
Northrop 0.85 0.70
Target D/E for acquisition of Hughes = 1
Hughes's expected unlevered cash flow next year = $300 million
Growth rate of cash flows for Hughes = 5% per year
Tc = 34%
Appropriate discount rate on debt: Rf = 8%
Expected return on the market portfolio: E(Rm)=14%

Reference no: EM13521880

Questions Cloud

What are the implications to a business : What are the implications to a business if the forecast is too high - show a graph of the historical and forecasted sales in one graph

Explain how a proponent of ethical nihilism : Dzhokhar Tsarnaev has pleaded not guilty to killing four people associated with the Boston Marathon bombings. Tsarnaev, a Muslim who identifies himself as Chechen rather than American, has written that "The U.S. Government is killing our innocent ..

Evaluate the maximum amout of work : A typical ethanol fuel (molar mass 46.07 g/mol) has an enthalpy of combustion of -1364 kJ/mol and 1 dm^3 has a mass of 0.77kg. Calculate the maximum amout of work that could be performed by the combustion of 10dm^3 of fuel.

Obtain the critical angle for the total internal reflection : Light in a transparent material (index of refraction 1.333) strikes the boundary with another transparent material (n=1.010). obtain the critical angle for the total internal reflection

Compute the value of hughes using the wacc approach : In 1985, General Motors was evaluating the acquisition of Hughes Aircraft Corporation, and assumed that Hughes was of approximately the same risk as Lockheed and Northrop. Given the following information in the table, and also assuming that cash f..

Compute the ph of a buffer solution made by mixing formate : Calculate the pH of a buffer solution made by mixing 40.4 g of potassium formate into 1 L of a 0.09 M solution of formic acid. Give the pH to two decimal places.

Determine how much time has elapsed the earth : A spaceship takes a nonstop journey to a planet and returns in 100 hours according to a clock on the spaceship. how much time has elapsed the earth

What is the area of each turn in the coil : An AC generator rotating at 60 Hz in a 300 Gauss field has 1000 turns and produces an rms voltage of 150 volts, What is the area of each turn in the coil

Find the frequency of this light in vacuum and in a material : In a material having an index of refraction n , a light ray has frequency f, wavelength ?, and speed v. What is the frequency of this light in vacuum and in a material having refractive index n1

User Account

All Pages