P&G sold its prescription drug business to Warner-Chilcott, Ltd. for $3.1 billion. If income from product sales is $400,000,000,000 per year, what rate of return will the company make over a 10-year planning horizon?
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P&G sold its prescription drug business to Warner-Chilcott, Ltd. for $3.1 billion. If income from product sales is $400,000,000,000 per year, what
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- BookFinders Inc. is making a decision about investing in new technology. It currently expects to earn Php 100,000,000 in its lifetime. If it invests in brand-new equipment today, its expected earnings will permanently increase by 5% per day. What is the expected value of investing in the new equipment?Acme is looking to acquire Pinder Co now. Acme is expected to generate annual cash flows of $15,000,000 in perpetuity and Pinder is expected to generate annual cash flows of $6,000,000 in perpetuity. The discount rate for both Acme and Pinder is 8%. If Acme acquires Pinder, Acme expects to be able to reduce operating costs by $4,500,000 for the first five years. However, Acme will also incur integration costs of $3,000,000 in the first year. All cash flows occur at the end of the year. To encourage investment into electric bicycles, the government is offering Acme an option to abandon its operations and sell all related assets for $1 million at the end of year 4. If Acme chooses the option to sell all related assets to the government, it will not receive the cash flows generated from the electric bicycle business in that year. What is the value of this option? Answer based only on the information provided.Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $218,000, $224,000, and $231,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 11.5 percent, what is the maximum Southern Tours should pay today to acquire Holiday Vacations? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
- Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $185,000, $225,000, and $345,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 12 percent, what are the maximum Southern Tours should pay today to acquire Holiday Vacations? a. 503,098 b. 538,615 c. $545,920 d. $590,110A manufacturer of video games develops a new game over two years. This costs $850,000 per year with one payment made immediately and the other at the end of two years. When the game is released, it is expected to make $1.20 million per year for three years after that. What is the net present value (NPV) of this decision if the cost of capital is 10%? OA. $1,462,112 OB. $1,005,202 OC. $913,820 OD. $1,736,258With annual earnings of $32.5 million every year, Durango Data was confident that this amount of profit could be sustained indefinitely if it simply maintained its current portfolio of assets and avoided any new projects. But Durango is approached by a data warehouse technology company with an opportunity for Durango to invest $29 million today; and $45 million one year from now in a new product that requires technical development and regulatory approval. The new investment will generate annual after-tax cash flow of $17 million in perpetuity starting three years from today. Durango has 14.0 million shares outstanding and the required rate of return on the stock is 11%. What is the price of one Durango share (the share price stated as $ per share) if it continues "business as usual" and turns down the investment opportunity? $17.01 $15.44 $25.93 $18.03 $21.10
- Alfa Inc company is targeted for merger. In the present, the revenues of the company are $10 mil and it is forecast that in the next years it will increase by 10% each year. The operating expenses are $8 mil, which are expected to grow with the same growth rate as the revenues. Depreciation is $500,000 and is estimated to increase by $50,000/year. The investment needs (CAPEX) are $200,000 each year, and the short term financing needs (NWC) are estimated at 2% of turnover. The company has $1 mil in net debts, at an interest rate of 4.5%. The risk-free rate for government bonds is 4.5%, the market risk premium is 6% and beta coefficient is 1.5. The D/E ratio is 0.5After the merger, the D/E ratio will be 0.35 taking into account the repayment of loans forecasted by the acquirer. Net debt = 700,000 after the deal b) Will the company record a financial synergy. Compute the value of the synergy. c) $10 mil will be a good price for the deal?Halloween, Incorporated, is considering a new product launch. The firm expects to have an annual operating cash flow of $9.2 million for the next 8 years. The discount rate for this project is 13 percent for new product launches. The initial investment is $39.2 million. Assume that the project has no salvage value at the end of its economic life. a. What is the NPV of the new product? (Do not round intermediate calculations and After the first year, the project can be dismantled and sold for $26.2 million. If the estimates of remaining cash flows are revised based on the first year’s experience, at what level of expected cash flows does it make sense to abandon the project?OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $501 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.7 million and its cost of capital is 12.0%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should OpenSeas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change? SITTE a. Prepare an NPV profile of the purchase. To plot the NPV profile, we compute the NPV of the project for various discount rates and plot the curve. The NPV for a discount rate of 2.0% is $ million. (Round to one decimal place.)
- OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship would cost $497 million, and would operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $71.1 million (at the end of each year) and its cost of capital is 12.5%. a. Prepare an NPV profile of the purchase. b. Estimate the IRR (to the nearest 1%) from the graph. c. Is the purchase attractive based on these estimates? d. How far off could OpenSeas’ cost of capital be (to the nearest 1%) before your purchase decision would change?Suppose Canadian Tire is considering investing in warehouse-management software that costs $500,000, has $50,000 residual value, and should lead to cost savings of $120,000 per year for its five-year life. In calculating the ARR, which of the following figures should be used as the equation's denominator?A company receives 13.78% per year from accounts. They are considering a project that will force them to wait 9 years, before then can consistently deposit profits of $95,497 every year for 15 years. How much is this project worth to them now?