Reference no: EM131342115
Waysafe Inc. consists of two grocery stores. The first store is fairly valued at $60M and the second store, valued at $50M, could be torn down and then the land could be sold for $75M. Waysafe is unwilling to tear down this store and sell the land, however, because the store has been with the business since the beginning. The firm is all-equity and has 1M shares outstanding priced at $110.00 per share.
Your business, Blair Capital, is interested in purchasing half of the equity of Waysafe so you can tear down the second store and sells its valuable real estate. Your firm is a publicly traded company that has 4M shares outstanding at a price of $125 per share.
a) You announce your intention to purchase this firm using cash. Shareholders are aware of the value you will add to the firm by tearing down the second store and thus will revise the price at which they are willing to sell their shares upward upon hearing the announcement. What is the NPV of your investment?
b) You quietly purchase 5 percent of this firm at the current market price using cash and you then announce your intention to purchase the remaining 45 percent of the firm. What is the NPV of this investment?
c) You announce your intention to purchase 50 percent of this firm by issuing shares of your own firm and paying with those shares. Shareholders will revise the price of their shares upward upon hearing your announcement. What percentage of your firm do you have to sell to obtain 50 percent of Waysafe?
Company should use a firm commitment offering
: Larissa Warren and Dan Ervin have been discussing the future of East Coast Yachts. The company has been experiencing fast growth, and the future looks like clear sailing. After deliberation, Larissa and Dan have decided that the company should use a ..
|
Preferred stock-debt and market
: You are given the following information concerning Parrothead Enterprises: Debt: 10,800 7.3 percent coupon bonds outstanding, with 22 years to maturity and a quoted price of 108.5. Market: An expected return of 10.2 percent, a risk-free rate of 5.15 ..
|
What is the net cost of call premium
: Dairy Corp. has a $20 million bond obligation outstanding and a coupon rate of 8%. Dairy Corp. has the ability to buy back the debt at 7% above par and issue new debt at 6.5%, so it is considering refunding this bond. Assume the underwriting cost for..
|
What is the value of the combined firm
: When a firm has cash flow problems, there are potential negative feedback effects. For example, the firm may need to cut capital expenditures and research and development activities that are necessary to remain competitive in its industry. What perce..
|
What is the npv of your investment
: Waysafe Inc. consists of two grocery stores. The first store is fairly valued at $60M and the second store, valued at $50M, could be torn down and then the land could be sold for $75M. You announce your intention to purchase this firm using cash. Sha..
|
Which fund has a higher systematic risk
: You have collected 6 years of monthly data on return of funds ABC and XYZ as well as on S&P/TSX composite index and the government short-term bills (risk-free). Which fund has a higher systematic risk? Why? Which fund has a higher residual risk? Why?..
|
Calculate strickler cash conversion cycle
: The Wei Corporation expects next year's net income to be $15 million. The firm's debt ratio is currently 40%. Wei has $12 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio. Calculate Strickler’s cash co..
|
What measurement instruments will you use
: RES-600-2500: What are the data collection strategies you will use in your research proposal? What measurement instruments will you use? What sampling methods will you use?
|
Is there agreement and a contract
: Johnny and Sally are students at Nononline University. Sally often admires Johnny's iPod in the Business Law class that they take together. One Friday night she decides to send Johnny the following e-mail:
|