iii) For the onetime costs we do not have enough data to calculate the company wise expenses so, we discount it at a rate that seems reasonable. In this case which we have assumed to be the mean of the WACCs of the two entities. 3. Will synergy cash-flows allow the banks to increase their debt? Ans: Since, cost synergies will not change the book values of equities for the merged entity, but they will be transferred to the retained earnings which will increase the overall equity.
What is the company’s total assets turnover? What is the firm’s equity multiplier? 13-5 pg 278 (3–7) Current and Quick Ratios Ace Industries has current assets equal to $3 million. The company’s current ratio is 1.5, and its quick ratio is 1.0. What is the firm’s level of current liabilities?
Ratio | Formula | Amaon 2013 | eBay 2013 | Debt Ratio | TL/TA | | | In leverage ratio, I choose debt ratio, eBay is 24.6% while Amazon is 54.8%. In this ratio, eBay is lower than Amazon which means eBay has less debt should to pay than Amazon. EBay’s assets are financed more through equity than debt compare to Amazon, illustrated that eBay has a lower risk in operation. In addition, eBay may have more borrowing capacity and financial flexible to enlarge its business than Amazon. Let’s see some profitability ratio to have some in-depth discussion.
We can compute the levered value of the plant using the WACC method. Goodyear’s WACC is ￼ Therefore, ￼ A divestiture would be profitable if Goodyear received more than $47.6 million after tax. Problem 18-5 Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%. a.What is Alcatel-Lucent’s WACC?
Financial Markets (N13302) Mock Paper (2010/2011) Question 1 (a) BSC Industries has just paid its annual dividend of $10 per share. The dividend is expected to grow at a constant rate of 5% indefinitely. The beta of BSC industries stock is 1.3, the risk-free rate is 2%, and the market risk premium is 7%. (1) What is the intrinsic value of the stock? (2) What would be your estimate of intrinsic value if you believed that the stock was riskier, with a beta of 1.7?
Explain why the yield on a convertible bond is lower than the yield on an otherwise identical bond without a conversion feature. The option to convert the bond into stock is valuable, hence its price will be higher and its yield lower. 4. You own a bond with a face value of $10,000 and a conversion ratio of 450. What is the conversion price?
Yield: (Sold Price-Purchase Price/Purchase Price)*(365/time held) Yt=((9100-9000)/9000)*(365/90) Yt=4.506 % or 4.51 % 2. T-bill Discount Newly issued three-month T-bills with a par value of $10,000 sold for $9,700. Compute the T-bill discount. Yield: (Par-Purchase Price/Par)*(360/time held) YD= ((10000-9700)/10000)*(360/90) YD= 12.000% 3. Commercial Paper Yield Assume an investor purchased six-month commercial paper with a face value of $1 million for $940,000.
= $62,200 C. What is Anderson Company’s total owners equity? = $88,200 D. What is Anderson Company’s debt to equity ratio? = 0.70 to $1 Question 5: Farwell Company has the following information from its most fiscal year. Use the relevant information to determine the net income (loss) for the period. A.
$1,500,000/$12,000,000 = 0.125 or 12.5% Each dollar of revenue produces 12.5% of net income or profit. Cash flow= cash generated during the year The rough estimation of cash flow = net income + non -cash expenses, in this case, $1,500,000 + $1,500,000 = 3,000,000 C. Now, suppose the company changed its depreciation calculation procedures (still within GAAP) such that its depreciation expense doubled. How would this change affect Brandywine’s net income, total profit margin, and cash flow? Brandywine Homecare Income statement with double depreciation expense: Month ending December 31, 2007 Revenue $12,000,000 Total revenue $12,000,000 Expenses: Depreciation $ 1,500,000x2= 3,000,000 Other 12,000,000 x 75/100 = 9,000,000 Total expenses= Depreciation + Other expenses= 1,500,000x2+ 9,000,000= $12,000,000 Total revenue – total expenses = Net income or Profit - 12,000,000- 12,000,000= 0 What