Determine the company rate of return after the takeover

Assignment Help Financial Accounting
Reference no: EM132778903

Question - The two parts of this question all refer to the same information as follows.

Ariella owns a company in The Bahamas which pays no tax. It has a value of $15 million and it is returning 18% per annum. She owns it outright (no debt). Ariella agrees to sell the firm to Charlie for $15 million. Charlie will fund two thirds of this from his own cash and borrow one third using a bank loan which pays interest at 5% per annum. The takeover does not change the risk characteristics of the business.

Required -

(a) Determine the company's rate of return after the takeover.

(b) Determine the rate of return that Charlie should receive on his investment.

Reference no: EM132778903

Questions Cloud

Which is the best course of action for flock shareholders : Which, in your opinion, is the best course of action for Flock's shareholders? Justify your answer. Be sure to include relevant examples where appropriate.
What will sales be for the Sporting Goods Division : The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division
What amount should rich include in income statement : Rich, Inc. acquired 30% of Doane Corporation's, Before income taxes, what amount should Rich include in its 2014 income statement as a result of the investment?
Defectives per million opportunities : Defectives per Million Opportunities (DPMO). Process capability index
Determine the company rate of return after the takeover : Ariella agrees to sell the firm to Charlie for $15 million. Determine the company rate of return after the takeover
Find the budgeted materials cost for the period : The cost of materials per unit is $150 and an ending materials inventory of $55 000 is desired, find the budgeted materials cost for the period
Calculate the cash conversion cycles for WOW : Consider the following table that contains selected financial data for Woolworths (WOW) for financial year 2018. Calculate the cash conversion cycles for WOW
Lead to police subculture : List three factors that lead to police subculture. you abide by the informal policy extending courtesy to city politicians? Why?
How many compensable injuries happened last year : Estimate the total direct costs, indirect costs, and the amount of sales of widgets that are needed to cover the total cost of all the company accidents.

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd