most common form of organization reduced legal liability for investors lower taxes harder to transfer ownership 4. Serox stock was selling for $20 two years ago. The stock sold for $25 one year ago, and it is currently selling for $28. Serox pays a $1.10 dividend per year. What was the rate of return for owning Serox in the most recent year?
Usually a discount of 10 percent to 40 percent is applied to private companies due to the lack of liquidity of their shares. Precedents/acquisition comps: At what metrics (same as above) were similar companies acquired? Discounted cash flow (“DCF”): Based on the concept that value of the company equals the cash flows the company can produce in the future. An appropriate discount rate is used to calculate a net present value of projected cash flows. Leveraged Buyout (“LBO”): Assuming an IRR (usually 20 percent to 30 percent), what would a financial buyer be willing to pay?
After the transaction this shareholder no longer has a controlling interest. Given these facts, to induce the shareholder to sell the block of stock Target Inc. was forced to pay an amount in excess of the current market price of the stock. Target Inc. paid the shareholder $40 per share when the market price was $30 per share. Question How should Target Inc. account for the purchase of this treasury stock? Required 1.Provide a brief written description of the proper accounting treatment, including how the extra $10 paid per share is recorded.
Assignment from the Readings Roberta Willis ACC 400 November, 2014 Kylene Smith ● Case 13-4 Application of SFAC No. 13 a. What is the theoretical basis for the accounting standard that requires certain long-term leases to be capitalized by the lessee? Do not discuss the specific criteria for classifying a specific lease as a capital lease. When there is a transfer in a lease, all benefits along with risk are transferred to the lessee and will be capitalized by the lessee as well.
(2) What would be your estimate of intrinsic value if you believed that the stock was riskier, with a beta of 1.7? [40%] (b) CBD stock has an expected ROE of 15% per year, expected earnings per share of $6, and expected dividend of $4 per share. The beta of CBD stock is 1.3, the risk-free rate is 2%, and the market risk premium is 7%. What are its expected growth rate, its price, and its P/E ratio? [40%] (c) Discuss why P/E multiples are in general negatively correlated with risk and positively correlated with growth.
pref stock is A type of preferred stock with a provision that stipulates that if any dividends have been omitted in the past, they must be paid out to preferred shareholders first, before common shareholders can receive dividends. Sept. 1979 $1.80 Senior convertible cumulative preferred stock July 1980 15% Subordinated debentures Adding $52.5M debt gives Oct. 1980 $1.84 Cumulative convertible preferred stock April 1981 14⅛% Subordinated debtenture Aug. 1981 10¼% Convertible subordinated debenture May 1982 10% Convertible subordinated debenture Sept. 1982 12⅞% Subordinated debenture March 1983 7¾% Convertible subordinated debenture Exhibit 6 Public Sales of
The recent corporate strategy of BP was Diversification, the launch of Stockbridge of internal public securities investment fund. The investment strategy Stockbridge is: * Publicly traded securities in 10-20 U.S. firms * Period: 3-5 years * Not deep value investors * Not high value, short term * Why does BP’s corporate strategy lead to superior returns? Because Berkshire’s investment process was hightly selective. They only selected less than 60 out of thousand investment opportunities, performed extensive industry and company due diligence process to select the good company. * What is their portfolio?
The manager cited the resulting high depreciation charges as the justification for the price boost. He asked the president of the company to instruct Division P to buy from S at the $220 price. He supplied the following information: P's annual purchases of component 2,000 units S's unit and batch-related costs per unit $190 S's capacity related costs per unit $20 S's required return on investment $10 Suppose there are no alternative uses of the S facilities. Required 1) Will the company as a whole benefit if P buys from the outside suppliers for $200 per unit? 2) Suppose the selling price of outsiders drops another $15 to $185.
a. Ben, Inc. will increase the investment account for its pro-rata share of Black, Inc.’s net loss for the year. b. Ben, Inc. will increase the investment account for its pro-rata share of the dividends paid out by Black, Inc. for the year. c. Ben, Inc. will conform the accounting policies of Black, Inc. to its own accounting policies. d. None of the above is true regarding how Ben, Inc. accounts for its investment in Black, Inc. 6. Haystack, Inc. owns 30% of the outstanding stock of Hallmark, Inc. and accordingly uses the equity method to account for its investment.
a. b. What is the minimum level of synergies for Vodafone shareholders to at least break even on the deal? Estimate the market’s assessment on December 17, 1999 about the likelihood that the deal will succeed. To do so, construct a merger arbitrage position where you buy one Mannesmann share (at the price prevailing on December 17, 1999) and sell short 53.7 Vodafone shares. Assume that the deal finalizes in 3 months time and a risk—free interest rate of 5.5%.