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The venture investors and founders of ACE Products, a closely held corporation, are contemplating merging the successful venture into a much larger diversified firm that operates in the same industry. The owners of ACE estimate free cash flows that will be available to the enterprise next year at $5,200,000. Since the venture is now in its maturity stage, ACEs free cash flows are expected to continue to grow at a 6 percent annual compound growth rate in the future. A weighted average cost of capital (WACC) for the venture is estimated at 15 percent. Interest-bearing debt owed by ACE is valued at $17.5 million. In addition, the venture also has surplus cash of $4 million. ACE currently has 5 million shares in issue, with 3 million held by venture investors and 2 million held by its founders. The venture investors have an average investment of $2.50 per share, while the founders average investment is $.50 per share. A.Based on the above information, estimate the enterprise value of ACE Products. What would be the value of the ventures equity? B.How much of the value of ACE would belong to the venture investors versus the founders. How much would the venture be worth on a per-share basis? C.What would be the percentage appreciation on the stock bought by the venture investors versus the investment appreciation for the founders? D.If the founders have held their investments for 5 years, calculate their compound annual or internal rate of return on their investments. The venture investors made a first-round investment of 1.5 million shares at $2 per share 4 years ago. What was the compound annual rate of return on the first-round investment? Venture investors made a second-round investment of 1.5 million shares at $3 per share 2 years ago. Calculate their compound rate of return on this investment.
Evaluate the amount of accrued interest that was included in the proceeds received from the bond sale. Show calculation and prepare journal entry for issuance of the bonds.
Little Cabbage Firm acquired an adjacent lot to construct. Fees paid to remove an old building from the land were $9,000. Materials salvaged from the demolition of the building were sold for $3,000. A contractor was paid $800,000 to construct a new..
Property, plant, and equipment is normally audited in a different manner than current asset accounts. Why is this so? Discuss differences in how property, plant, and equipment is audited compared to current assets.
A U.S. manufacturer wants to conduct business through a foreign subsidiary organized in a low tax jurisdiction. Expalin how might it do so without being currently taxed on the subsidiary's foreign earnings?
Expenses sometimes make their contribution to revenue in a different period than when the expense is paid. Incurring wages in one period and paying in the next period often leads to which account appearing on the balance sheet at the end of the fi..
Give Sapling's entries reflecting the purchase of the wood chipper and give Fir's entries reflecting the sale of the wood chipper.
The financial accountant of Carlton Ltd has prepared draft financial statements for the year ended 30 June 2014 but is unsure about the tax calculations.
Compute the cost of civilian and military versions of Model KV10 using both direct labor dollars and machine hours as alternative allocation bases. Explain why Pelton Instruments may decide to use direct labor as an overhead allocation base.
SPA Corporation’s books, which are maintained using the accrual method, show the following income and expense items for the 2011 tax year: Find out the corporation’s charitable contribution carryover (if any).
If this investor believed that by owning the company he could extract &5000 per year in cash from the company in perpetuity, Illustrate what do think the investor would be willing to pay for the firm if the required return on the investment is 10%..
Prepare any outstanding adjusting journal entries for the year ended March 31, 2013 and post them to the trial balance. Prepare all financial statements in good form for the year ended March 31, 2013.
Show entries to record the selected transactions described Issued $3,250,000 of 10-year, 8% bonds at 97.
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