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A sporting goods manufacturer has decided to expand into a related business. Management estimates that to build and staff a facility of the desired size and to attain capacity operations would cost 450 million in present value terms. Alternatively, the company could acquire an existing firm or division with the desired capacity. One such opportunity is the division of another company. The book value of the division's assets is 250 million and its earnings before taxes and tax are presently 50 million. Publicly traded comparable companies are selling in a narrow range around 12 times current earnings. These companies have book value debt to asset ratios averaging 40 percent with an average interest rate of 10 percent.
Using a tax rate of 34 percent, estimate the minimum price the owner of the division should consider for its sale?
Demonstrate how to prepare the financial statements for BreatheScreen Inc. for the full year ended December 2013.
Calculate the gross price paid by consumers after a per-ticket tax of $4. - Calculate the after-tax price received by ticket sellers.
‘Things that are running smoothly should not be subject to any control. If you commit yourself to just finding and fixing problems, you'll be able to carry out effective control (within an organisation) with fewer personnel’ (Minoura, 2003). Discuss ..
Assuming a target capital structure of: 40% debt 20% preferred stock 40% common equity What would be the WACC given the following: all debt will be from the sale of bonds with a coupon of 10% (assume no flotation costs), preferred stock's associated ..
You buy a $10,000 par Treasury bill at $9,575 and sell it 60 days later for $9,675.- What was your EAR?
Which of the following types of foreign banking operations would best suit the circumstance described? A major customer of a U. S. commercial bank requests a loan to finance growing export activity in Mexico. Management notices that an increasing num..
Illustrate the arbitrage strategy for one contract. To show the dollar arbitrage, assume the one-month LIBOR rate on December 1 was 7 percent.
HydroTech Corp stock was $50 per share a year ago when it was purchased. Since then, it paid a $3 per share dividend. The stock price is currently $52. If you owned 500 shares of HydroTech, what was your percent return for the past year?
Non-dividend-paying stock whose current price S(0) = S is $40. After each period, there is a 60% chance that the stock price goes up by 20%. If the stock price does not go up, then it drops by 10%.
Yangru Corporation was offered a loan of $1,000,000 at a nominal rate of 8.5%, simple interest, with monthly interest payments and a 365-day year. The loan must be repaid at the end of one year, but until then only the monthly interest must be paid. ..
Explain the concept of capital flight in the context of a fixed exchange rate regime. Make sure to include in the discussion what economic conditions would permit a country to establish such regime in the first place. Also, provide examples and reaso..
A bond was issued five years ago with 20 years to maturity carrying 8 percent coupon rate and it was issued at par. The issuer’s financial performance has deteriorated significantly and the premium for the possibility of bankruptcy has changed from 3..
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