Using information about the following company, calculate the share premium / (discount) a private equity house will be willing to pay for the Company. Assume pre deal net debt is refinanced. Assume the company has no dilutive securities. Required IRR 21.6% Total debt immediately after the LBO 550.5 Exit multiple (EV/EBITDA) 8.4 x EBITDA % growth per year 7.5% Exit year % of debt remaining at exit Current share price Shares outstanding LTM EBITDA Pre deal net debt 3 57.2% 16.9 45.2 157.9 251.8

Using information about the following company, calculate the share premium / (discount) a private equity house will be willing to pay for the Company. Assume pre deal net debt is refinanced. Assume the company has no dilutive securities. Required IRR 21.6% Total debt immediately after the LBO 550.5 Exit multiple (EV/EBITDA) 8.4 x EBITDA % growth per year 7.5% Exit year % of debt remaining at exit Current share price Shares outstanding LTM EBITDA Pre deal net debt 3 57.2% 16.9 45.2 157.9 251.8

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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Crandall’s investment is in less than 2% of Mobil’s stock, which Crandall expects to holdfor three years and then sell. What type of investment is this?a. Debtb. Equity with significant influencec. Equity with insignificant influenced. Consolidation
Want the Correct answer from bellow options
Macbeth Spot Removers is entirely equity financed with values as shown below: Data Number of shares 500 Price per share $ 10 Market value of shares $ 5,000 Market value of debt $ 5,000 $ 500 Interest at 4% Although it expects to have an income of $1,500 a year in perpetuity, this income is not certain. This table shows the return to stockholders under different assumptions about operating income. We assume no taxes. Outcomes Operating income ($) 500 1,000 Interest ($) 500 Equity earnings ($) 0 Earnings per share ($) Return on shares (%) 0 Ө 500 500 1.00 10. 1,500 500 1,000 2.00 20 2,000 500 1,500 3.00 30 Expected outcome Suppose that Macbeth Spot Removers issues only $3,000 of debt and uses the proceeds to repurchase 300 shares. The interest rate on the debt is 4%. a. Calculate the equity earnings, earnings per share, and return on shares for each operating income assumption. b. If the beta of Macbeth's assets is 0.85 and its debt is risk-free, what would be the beta of the equity…
Railsplitters, Inc. has the following information for its capital structure: Instrument: Amount Issued Current Price YTM Bond A $500 Million 100.82 4.36% Bond B $350 Million 101.36 4.49% Common Stock 42.5 Million Shares $28.21 per share E(R ) Market = 8.65% β = 1.27 Expected Dividend = $1.95 Rf = 2.10% Growth Rate = 2.75% Given this information, if the tax rate of the firm is 30%, what is the after-tax cost of debt?
Assume ABC Corporation is a multinational company with the following financial information: Market value of equity (E): $500 million Market value of debt (D): $300 million Market value of preferred stock (PS): $50 million Cost of equity (Re): 10% Cost of debt (BTrd): 5% Corporate tax rate (Tc): 25% Cost of preferred stock ( Rps): 8% a. Calculate the WACC for ABC Corporation. Needs to be done in Excel
The following financial information is available on Rawls Manufacturing Company: Current per share market price $48.00 Current per share dividend $3.50 Current per share earnings $6.00 Beta 1.1 Expected rate of return on market 12.0% Risk-free rate 6.0% Expected long-term growth rate 5.0% Rawls can issue new common stock to net the company $44 per share. Determine the cost of external equity capital using the dividend capitalization model approach. (Compute the answer to the nearest 0.1%.) a 12.6% b. 14.4% c.13.4% d.12.7%
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Estimating Components of both WACC and DDMAn analyst estimates the cost of debt capital for Abbott Laboratories is 3.0% and that its cost of equity capital is 5.0%. Assume that ABT’s statutory tax rate is 21%, the risk-free rate is 2.1%, the market risk premium is 5%, the ABT market price is $84.10 per common share, and its dividends are $1.28 per common share.(a) Compute ABT’s average pretax borrowing rate and its market beta. (Round your answers to one decimal place.) Average borrowing rate = Market beta = (b) Assume that its dividends continue at the current level in perpetuity. Use the constant perpetuity dividend discount model to infer the market's expected cost of equity capital. (Hint: Use Price per share = Dividends per share/Cost of equity capital.) (Round your answer to one decimal place.)
Here is some information about Stokenchurch Incorporated: Beta of common stock = 2.0 Treasury bill rate=4% Market risk premium = 8.3% Yield to maturity on long-term debt = 6% Book value of equity = $520 million Market value of equity = $1,040 million Long-term debt outstanding = $1,040 million. Corporate tax rate = 21% What is the company's WACC? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. WACC %

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