uestion: How much is the projected terminal cashflow (cashflow after year 4 to infinity) from Western Mountain Pizza?
Q: Pizza Palace (PP), is considering purchasing a smaller chain, Western Mountain Pizza. PP's analysts…
A: Data given: Cash flow Y4 =$5000,000 Growth rate(after Y4)=5% Post merger: Beta=1.5 Risk free…
Q: Acme Co is considering an acquisition of Pinder Co at the end of the current year. Acme expects to…
A: Commercial transactions termed mergers and acquisitions occur when the ownership of one company or…
Q: OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $504 million and…
A: Capital budgeting refers to the process of evaluating and selecting long-term investment projects…
Q: OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $498 million and…
A: Here,Initial Investment is $498 millionAnnual Inflows are $70.1 millionTime Period is 20 yearsCost…
Q: Southern tours os considering acquiring holiday vacations. Management believes holiday vacation can…
A: A study that proves that the 1value of money today is higher than the future value of money is term…
Q: XYZ Auto, a national autoparts chain, is considering purchasing a smaller chain, ABC Auto. Pit Row’s…
A: The question is related to acquisition of a company by another company. The valuation is based of…
Q: Herbo is a pharmaceutical company that is eyeing expansion. The entire decision on expansion is…
A: Here's a detailed explanation for better understanding. To determine whether Herbo should expand,…
Q: How much is the projected terminal cashflow (cashflow after year 4 to infinity) from Western…
A: Information Provided: Year 1 CF = 1,500,000 Year 2 CF = 2,000,000 Year 3 CF = 3,000,000 Year 4 CF =…
Q: The Adam Corporation is evaluating a project to setup a plant to manufacture According to the CFO,…
A: Capital budgeting is the technique used to evaluate the profitability of the capital investment or…
Q: Predator Company is considering the acquisition of Prey Company at a cash price of $60,000. Predator…
A: Acquisition price = a = $60,000Liabilities = l = $90,000Sold price = s = $65,000Cash flow = cf =…
Q: Karga Transportation operates in the landspeeder and interstellar transports markets. Karga will…
A: GIVEN, LANDSPEEDER INTERSTELLAR CASHFLOW $40 million per year $50 million per year n 10…
Q: OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $502 million and…
A: Capital budgeting refers to the process of evaluating and selecting long-term investment projects…
Q: Cake World is considering purchasing a competitor, Cupcake. Projected cash flows as a result of the…
A: given, Beta = 1.2 tax = 40% rf = 8% market risk premium = 4% g = 6% YEAR CASHFLOW 1 1450000 2…
Q: Pit Row Auto, a national auto parts chain, is considering purchasing a smaller chain, Southern Auto.…
A: The cost of capital is a rate of return, for investors, but the cost for the company, as investors…
Q: CUPPY is considering purchasing a competitor, Cupcake2. Projected cash flows as a result of the…
A: CUPPY is considering purchasing a competitor, Cupcake2. Projected cash flows as a result of the…
Q: Welcome Inn Hotels is considering the construction of a new hotel for $90 million. The expected life…
A: Net present value (NPV) : Net present value (NPV) is the difference between the present value of…
Q: Chae is valuing a new division and has identified a comparable firm which has an expected return on…
A: WACC is a weighted average cost of the firm to raise the funds from different sources. WACC is used…
Q: a. What is the synergy from the merger? (Do not round intermediate calculations and enter your…
A: A.The synergy from the merger is the increase in annual after-tax cash flow, which is $390,000.B.…
Q: The owners of a chain of fast-food restaurants spend $27 million installing donut makers in all…
A: The NPV is calculated as present value of cash inflows less the initial cost of project
Q: Gone Mad Company Limited is considering two mutually exclusive projects to expand its operations:…
A: Cash flow for R&D: Year Cash inflow Cumulatice cash inflow 1 $100,000 $100,000 2 115,000…
Q: mployees at JPGR Inc have been busy evaluating a potential new $9 million investment for their firm…
A: NPV is a Capital Budgeting Technique that helps in decision-making on the basis of future Cash…
Q: OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499 milion and…
A: NPV Profile of the Purchase and Identification of IRR on the Graph is as…
Q: $15,000,000 five years ago to acquire the plant. Now top management is considering an opportunity to…
A: NET PRESENT VALUE = PV of CASH inflows - PV of CASH outflows
Q: Herbo is a pharmaceutical company that is eyeing expansion. The entire decision on expansion is…
A: To determine if Herbo should expand, we need to calculate its Weighted Average Cost of Capital…
Q: On April 1, 2021, Eminem Company purchased 4,000 of the P1,000 face amount, 8% bonds of Stan Company…
A: Accounting is essential to operating a company since it allows businesses to track income and…
Q: A retail coffee company is planning to open new coffee 95 outlets that are expected to generate…
A: Solution:- Net Present Value (NPV) means the net value in today’s terms after adjusting initial…
Q: a. The expected cash flow for the new business is $ (Round to the nearest dollar.)
A: The expected cash flow can be calculated using the probability and cash flow given in the question.
Q: Stay-In-Style (SIS) Hotels Inc. is considering the construction of a new hotel for $80 million. The…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: Donna Clark wants to open a restaurant in a historic building. The property can be leased for 20…
A: Present value is the present value of all future cash flows discounted at the cost of capital.
Q: A retail coffee company is planning to open 95 new coffee outlets that are expected to generate…
A: Capital budgeting is the process by which a corporation examines potential large projects or…
Q: OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $501 million and…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: The vice president of operations at Dintell Corporation, a majorsupplier of passenger-side…
A: 1) Net expected present value can be found out by getting expected sales from the expected market…
Q: 3 $475,000 Year 4 $550,000 After four years, the net cash flows are expected to grow at a…
A: The optimal pricing would be the present value of cash flow and present value of terminal value…
Q: Data related to the expected sales of golf balls and tennis balls for Sports Inc for the current…
A: Break even point is calculated as the ratio of fixed costs and the weighted average contribution…
Q: OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $499 million and…
A: NPV profile is a profile or a graph used in capital budgeting. This graph shows the NPV values for…
Q: A retail coffee company is planning to open 110 new coffee outlets that are expected to generate…
A: Answer: Calculation of the present value of the free cash flows: Formula, we will use here: Present…
Q: Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain…
A: Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain…
Q: Hathaway, Inc., a resort company, is refurbishing one of its hotels at a cost of $6,820,850.…
A: IRR is the internal rate of return.
Q: Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain…
A: Discounting all the future cashflows will provide the present value.
Q: The owners of a chain of fast-food restaurants spend $29 million installing donut makers in all…
A: The net present value(NPV) of the project is calculated using following equationWhere, CF0 is the…
Q: Acme is looking to acquire Pinder Co now. Acme is expected to generate annual cash flows of…
A: Operating cash flow (OCF) is a measurement of how much money a company generates through regular…
Q: The owners of a chain of fast-food restaurants spend $26 million installing donut makers in all…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: A start-up in the retail market plans to invest $200,000 in advertising in its first start-up and…
A: Present value annuity With annuity (PMT), interest rate (r) and period (n), the present value (PV)…
Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain Pizza. Projected
Question: How much is the projected terminal cashflow (cashflow after year 4 to infinity) from Western Mountain Pizza?
Step by step
Solved in 2 steps
- Spentworth Industries Corp. is considering an acquisition of Keedsler Motors Co., and estimates that acquiring Keedsler will result in incremental after-tax net cash flows in years 1–3 of $9 million, $13.5 million, and $16.2 million, respectively. After the first three years, the incremental cash flows contributed by the Keedsler acquisition are expected to grow at a constant rate of 3% per year. Spentworth’s current beta is 1.60, but its post-merger beta is expected to be 2.08. The risk-free rate is 4.5%, and the market risk premium is 6.60%. Based on this information, complete the following table by selecting the appropriate values. (Note: Round your intermediate calculations to two decimal places.) Value Post-merger cost of equity Projected value of the cash flows at the end of three years The value of Keedsler Motors Co.’s contribution to Spentworth Industries Corp.Fast Growth Start-Up Company (FGSUC) has a new successful Internet business. It expects to earn $100 million of aftertax free cash flows this year. The company proposes to go public, and the company’s internal financial staff suggests to the board of directors that a valuation of $2.5 billion seems reasonable for the company. The investment banking firm’s analyst and the financial staff at the company agree that the growth rate in free cash flows will be 25% per year for several years before the growth rate drops back to one more closely resembling the growth rate in the economy as a whole, which all assume to be 4% per year. Assume that the after-tax discount rate suitable for such a new venture is 15% per year. How many years of growth in after-tax free cash flow of 25% per year will FGSUC need to earn to justify a market valuation of $2.5 billion? Do not attempt to work this problem without using a spreadsheet program15
- 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.)Brett Collins is reviewing his company's investment in a cement plant. The company paid $16,000,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The company's desired rate of return for present value computations is 10 percent. Expected and actual cash flows follow: (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Expected Actual Year 1 $3,310,000 2,600,000 Required Year 2 $5,090,000 2,980,000 Year 3 $4,560,000 4,860,000 Year 4 $5,090,000 3,810,000 Year 5 $4,290,000 3,540,000 a.&b. Compute the net present value of the expected and actual cash flows as of the beginning of the investment. Note: Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answers to the nearest whole dollar.Brett Collins is reviewing his company's investment in a cement plant. The company paid $15.500,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The company's desired rate of return for present value computations is 10 percent. Expected and actual cash flows follow: (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Expected Actual Year 1 $3,380,000 2,700,000 Year 2 $4,950,000 3,060,000 Net present value (expected) Net present value (actual) Year 3 $4,580,000 4,900,000 Year 4 $5,040,000 Year 5 $4,250,000 3,860,000 3,530,000 Required a.&b. Compute the net present value of the expected and actual cash flows as of the beginning of the investment. Note: Negative amounts should be Indicated by a minus sign. Round your Intermediate calculations and final answers to the nearest whole dollar.
- 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?Cake World2 is considering purchasing a competitor, Cupcake2. Projected cash flows as a result of the merger are: Year1, P1,450,000; Year2, P1,750,000; Year3, P2,000,000; Year4, P2,500,000. In addition, Cupcake2's year4 cashflows are expected to grow at a constant rate of 6% after year 4. Cupcake's post merger beta is estimated to be 1.2 and its post-merger tax rate is 40%. The risk-free rate is 8% and the market risk premium is 4%. How much is the net advantage/disadvantage to Cake World2 if it acquires Cupcake2's 10,000,000 shares at the current market price of P9.Oriole has year-end account balances of Sales Revenue $839,807, Interest Revenue $13,020,Cost of Goods Sold $534,832,Administrative Expenses $193,450, Income Tax Expense $32,693, and Dividends $19,345. Prepare the year-end closing entries. (Credit ocount titles are automatically indlented when omount bentered Do not indent manually If no entry is required, select "No entry for the account titles and enter 0 for the amountl
- NUBD Co. is expanding its manufacturing plant, which requires an investment of P4 million in new equipment and plant modifications. NUBD’s sales are expected to increase by P2 million per year as are a result of the expansion. Cash investments in current assets average 30% of sales; accounts payable and other current liabilities are 10% of sales . What is the estimated total investments for this expansion?The owners of a chain of fast-food restaurants spend $25 million installing donut makers in all their restaurants. This is expected to increase cash flows by $9 million per year for the next five years. the discount rate is 6.2%, were the owners correct in making the decision to install donut makers? OA. Yes, as it has a net present value (NPV) of $8 million. O B. Yes, as it has a net present value (NPV) of $13 million. OC. No, as it has a net present value (NPV) of - $3 million. OD. No, as it has a net present value (NPV) of $1 million. CA retail coffee company is planning to open 110 new coffee outlets that are expected to generate $15.9 million in free cash flows per year, with a growth rate of 3.5% in perpetuity. If the coffee company's WACC is 9.5%, what is the NPV of this expansion? The present value of the free cash flows is $ million. (Round to two decimal places.)
