Assume a company has 12,5 million shares in issue. The current market price per share is R65 per share. The company has the opportunity to invest in aproject with a total value of R45 million. The net present value of the project is R35 million.What will the companies share price be if capital markets fully reflect the value of undertaking the project?1. R67,5002. R67,80O 3. R65O 4. R68

Option b: This option is correct. Step 1:We have to calculate the share price after accepting the…

Answered: Assume a company has 12,5 million…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Conglomerate Inc. is trading at $80/share, and is about to announce its intent to acquire Tiny Corp. who is an all-equity firm with 20 million shares trading at $5/share. The projected synergies from the acquisition are $15 million. What is the maximum exchange ratio Conglomerate Inc. could offer in a stock swap and still have the deal be positive NPV? 18.4 1.43 11.24 1.66
Company A has a market capitalization of $2410539999 and 22833777 shares outstanding. It plans to distribute $35977773 through an open market repurchase. Assuming perfect capital markets: What will the price per share of the firm be right after the repurchase?
As an analyst of Firm A, you are investigating the possible acquisition of Firm T. You estimate that investors currently expect a 6% growth in A's earnings and dividends. Under new management this growth rate would be increased to 8%, without any additional capital investment. You are considering a stock swap merger. What is the maximum exchange ratio that you can afford? EPS Dividend/Share Number of Shares Stock Price Firm A $5 $3 1000000 $90 Firm T $1.5 $0.8 600000 $20
Multiple choice: Assuming that SN North Company has the following net cash inflow: P60,000, P55,000, P50,000, and P45,000 for years 1, 2, 3, and 4, respectively. Assuming further that the company’s cost of capital is 25% for a net cost of investment of P120,000, the net present value, rounded off to the nearest whole number, is equivalent to: • P7,000• P7,300• P7,200• P7,100
Transco is considering acquiring Tenco. Tenco's current stock price is $23. What is the maximum price per share that Transco should offer based on the following data for Tenco: PV of future cash flows $200 million, 20 million outstanding shares, no debt, and discount rate of 12%?
Suppose that a bank purchased 15 million shares of Company E. The shares are bid $34.2 and offer $35.4. The mean and standard deviation of the bid-ask spread are 0.034483 and 0.054, respectively. What is the cost of liquidation that we are 99% confident will not be exceeded (i.e., in a stressed market condition)? O 2.402 O 0.259 O 1.201
A firm's cost of capital is 10%.It is considering two mutually exclusive projects X and Y.The details are given below: Project X Project Y PV factor at 10%Investments Rs.1,40,000 Rs.1,40,000 - Net cash inflows: Years 1 20,000 1,20,000 0.909 2 40,000 80,000 0.826 3 60,000 40,000 0.751 4 90,000 20,000 0.683 5 1,20,000 20,000 0.621 3,30,000 2,80,000 Calculate payback period and net present value of each project.
Marseille Manufacturing (MM) is considering raising money through a rights offering. MM currently has 10 million shares outstanding selling for €20 per share. Current shareholders will receive one right per share. Five rights are required to buy one share for €15. Will the rights be exercised? How much money will MM raise if all rights are exercised? What is the intrinsic value of a right (expected selling price for a single right)?
Two mutually exclusive investment opportunities require an initial investment of $8 million Investment A then generates $1.70 million per year in perpetuity, while investment B pays $1.00 million in the first y with cash flows increasing by 5% per year after that. At what cost of capital would an investor regard both opportunities as being equivalent? O A. 13% OB. 12% OC. 6% OD. 3%
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