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General electric wants to find the value of a japanese firm. pro-forma income statement is given below: (all yen figures below are in millions) Revenue Y 100 Costs Y(76) Depreciation Y(4) Interest Y(1) Pre-tax Y 19 After tax Y 11.40 it is expected that these cashflows will occur in perpetuity. further, the depreciation amount will equal the capital expenditures throughout in the future. unlevered cost of equity is 20% (in Yens). interest rate on debt is 10% (in Yens).
1. How much is the value of equity?
2. How much is the value of debt?
3. How much is the levered cost of equity (in Yens)?
4. How much is the WACC (in Yens)?
5. Assume a different capital structure with a larger debt amount, say 10 million Yens more than the amount assumed above. the firm value will increase by what amount?
Which of the following investment alternatives would provide the greatest ending wealth for your investment if you are thinking of opening a savings account? Record the return alternative with the highest EAR. Government of St Vincent and the Grenadi..
How long will it take Kate to pay for the same purchase if the minimum payment is changed to 3% of the outstanding balance of $3,750 but the interest rate is raised to 23%? How much interest will she pay in total?
ABC Limited's required rate of return is 10%. The company is considering the purchae of three machines, as indicated below. Consider each machine independently. Machine A will cost $75,000 and have a life of 15 years. Its salvage value will be $3,000..
Which of the following are equivalent under M&M proposition I? Maximizing firm value and maximizing firm profit. Maximizing firm value and minimizing the cost of capital
The following procedure is recommended when creating financial statements in Excel, in order to minimize error and make the statements easier to read when provided to others:
Assume that the % expected return for security A and the market M for a good, normal and bad economy (probabilities .3,.4,.3) are 20, 16, and 10 for A and 8, 4, and 12 for M. Also assume that you invest 40% in A and 60% in M. Compute the standard dev..
The Nullcom Inc. is considering to purchase a new machine. The cost of the machine is $200,000 and installation of $10,000. The machine will be depreciated straight-line to zero. The new machine needs an increase of new working capital of $30,000. Wh..
Interest on money market investments are pure discount securities. These securities are often quoted on a discount basis. Briefly describe what “pure discount security” means. Suppose you were to by a taxable bond yielding 5.32% and a non-taxable bo..
You are evaluating a project for The Ultimate Driver, guaranteed to correct that nasty slice you hit off the tee. You estimate the sales price of The Ultimate to be $599 and sales volume to be 2,000 units in year 1, 2,250 units in year 2, and 2,500 u..
Best Lodging has $1,000 face value bonds outstanding. These bonds pay interest semiannually, mature in 5 years, and have a 6 percent coupon. The current price is quoted at 101. What is the yield to maturity?
Discuss the different types of forecasts to include time-series, causal, and qualitative models. When might a researcher or project manager utilize exponential smoothing? What benefit does a Delphi technique provide when working with qualitative-base..
Calculate the expected payoff of each lottery. Rank the three lotteries according to the expected dollar winnings.
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