What it the npv of the proposed acquisition

Assignment Help Accounting Basics
Reference no: EM13137561

Blazer Inc. is thinking of acquiring Laker Company. Blazer expects Laker's NOPAT to be $9 million the first year, with no net new investment in operating capital and no interest expense. For the second year, Laker is expected to have NOPAT of $25 million and interest expense of $5 million. Also, in the second year only, Laker will need $10 million of net new investment in operating capital. Laker's marginal tax rate is 40%. After the second year, the free cash flows and the tax shields from Laker to Blazer will both grow at a constant rate of 4%. Blazer has determined that Laker's cost of equity is 17.5%, and Laker currently has no debt outstanding. Assume that all cash flows occur at the end of the year, Blazer must pay $45 million to acquire Laker. What it the NPV of the proposed acquisition? Note that you must first calculate the value to Blazer of Laker's equity.

Reference no: EM13137561

Questions Cloud

What is amount of gross profit realized in year : The property had cost yo $20,000 when it was purchased in 1998. under installment-sale metjod, what is the amount of gross profit realized in year 2011?
Create confidence interval for rating of the table : Give a 99% confidence interval for the rating of the table that would be given by an average member of the population of regular customers. Assume normality.
Product cost cross subsidization basics : Product-cost cross- subsidization is less likely to occur when: a) a single cost pool is used b) little effort is mae to trace cost objects c) a peanut butter approach is used to allocate overhead d) none of the above
Taxes on alcohol and tobacco : Research Topic: Should taxes on alcohol and tabacco be increased to help pay for rising medical costs?
What it the npv of the proposed acquisition : What it the NPV of the proposed acquisition? Note that you must first calculate the value to Blazer of Laker's equity.
What mass of the nuclide will remain after 98.4 years : The half-life of tritium (31H) is 12.3 years. If 47.0 mg of tritium is released from a nuclear power plant during the course of a mishap, what mass of the nuclide will remain after 24.6 years?What mass of the nuclide will remain after 98.4 years?
Related to web services : A review paper usually should include multiple (about 5) references. I would like to see references from referred conference proceedings or journals.
How loss should lara immediately recognize on this trade : Lara Co. traded its old computer for a new model. The following information is pertinent to this transaction: How much loss should Lara immediately recognize on this trade-in?
Probability that cpu demand of program exceed one minute : Program measured in minutes is found to follow a gamma distribution with parameters a=3 and b=2. what is the probability that CPU demand of a program will exceed 1 minute?

Reviews

Write a Review

Accounting Basics Questions & Answers

  Is it possible that a company receives a unqualified opinion

Is it possible that a company receives a unqualified opinion from the auditors on the financial report but a qualified one on internal control?

  What are the tax consequences to s

Sale of Property Acquired by Gift. In 2008 F gave his son S, 100 shares of IBM stock which at that time were worth $30,000. F paid a gift tax on the transfer of $5,000. Assuming F had purchased stock in 2004 for $40,000 what are the tax consequenc..

  What was the balance in work in process inventory account

On June 1, 2012, Dalton Production Company had beginning balances as shown in the T-accounts below. Materials inventory Work in process inventory Finished goods inventory Manufacturing overhead 10,000 20,000 25,000 41,000 During June.

  Concerning the overall fairness

The auditor's judgment concerning the overall fairness of the presentation of financial position, results of operations, and cash flows is applied within the framework of :

  What lump-sum will henry have to invest

What lump-sum will Henry have to invest now at 12% per year in order to have $2,000 at the end of each of the next two years?

  Probability of amounts in collection envelopes

A local church is studying the amount of offerings in an envelope from their early Sunday mornings services. The church studied 500 envelopes and found the following:

  What is the quick ratio

SDJ, Inc. has net working capital of $1,570, current liabilities of $4,380, and inventory of $1,875. What is the current ratio? What is the quick ratio?

  How should euker account for anticipated insurance recovery

Euker's legal counsel has determined that under Euker's property and casualty insurance policy, Euker is entitled to insurance recovery for the fair value of the manufacturing plant in excess of the deductible, and that such recovery is probable.

  Pay cash dividends

Tracy co. owns 4,000 of the 10,000 outstanding shares of penn corp. common stock. during 2010, penn earns 120,000 and pays cash dividends of 40,000. if the beginning balance in the investment account was 240,000 the balance at december 31, 2010 sh..

  Evaluate earnings per share

Evaluate earnings per share

  Calculate the amount of income from partnership

Compute the amount of income from the partnership which Potter should report for his tax year ended December 31, 2012.

  Total assets and customers account

If ABC Service collects $50,000 from customers on account: a) total assets are unchanged b) liabilities increases c) owners equity decreases d) onwers equity increases

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