Pizza Palace (PP), is considering purchasing a smaller chain, Western Mountain Pizza. PP's analysts expect the merger to result in incremental net cash flows as follows: Y1 = $1,500,000, Y2 = $2,000,000, Y3 = $3,000,000, Y4 =$5,000,000. In addition, Western's Y4 cash flows are expected to grow at a constant rate of 5% after Y4. Western's post-merger beta is expected to be 1.5 and its tax rate would be 40%. The risk free rate is presently 5% and the market risk premium is 4%. What is the Terminal value that goes into the calculation of the value of Western to Pizza Palace? Oa. 87,500,000.00 O b. 2,193,574.14 O c. 60,932,615.11. d. 66,100,785.47
Pizza Palace (PP), is considering purchasing a smaller chain, Western Mountain Pizza. PP's analysts expect the merger to result in incremental net cash flows as follows: Y1 = $1,500,000, Y2 = $2,000,000, Y3 = $3,000,000, Y4 =$5,000,000. In addition, Western's Y4 cash flows are expected to grow at a constant rate of 5% after Y4. Western's post-merger beta is expected to be 1.5 and its tax rate would be 40%. The risk free rate is presently 5% and the market risk premium is 4%. What is the Terminal value that goes into the calculation of the value of Western to Pizza Palace? Oa. 87,500,000.00 O b. 2,193,574.14 O c. 60,932,615.11. d. 66,100,785.47
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
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