Problem 21-10 Stock versus Cash Offers (LO2)Velcro Saddles is contemplating the acquisition of Skiers' Airbags Incorporated The values of the two companies as separate entitiesare $34 million and $17 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketingand administrative costs by $570,000 per year in perpetuity. Velcro Saddles considers offering Skiers' shareholders a 50% holding inVelcro Saddles. The opportunity cost of capital is 6%.a. What is the value of the stock in the merged company held by the original Skiers' shareholders?Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.b. What is the cost of the stock alternative?Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.c. What is the merger's NPV under the stock offer?Note: A negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer inmillions rounded to 2 decimal places.X Answer is complete but not entirely correct.a. Value of the stockb. Cost of the stockc. NPV$$$60.50 million30.25 x million30.25 x million

Net present value is computed by deducting the present value of cash outflows from the present value…

Answered: Velcro Saddles is contemplating the…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter15: Harvesting The Business Venture Investment

Section: Chapter Questions

Problem 1EP

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Problem 22-03 Merger Bid Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.35 (given its target capital structure). Vandell has $10.08 million in debt that trades at par and pays an 7.9% interest rate. Vandell’s free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 5% a year. Both Vandell and Hastings pay a 30% combined federal and state tax rate. The risk-free rate of interest is 7% and the market risk premium is 5%. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.4 million, $2.8 million, $3.5 million, and $3.79 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 5% rate. Hastings plans to assume Vandell’s $10.08 million in debt (which has an 7.9% interest rate) and raise additional debt…
eBook Problem 22-03 Merger Bid Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.60 (given its target capital structure). Vandell has $8.31 million in debt that trades at par and pays an 7.4% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 6% a year. Both Vandell and Hastings pay a 30% combined federal and state tax rate. The risk-free rate of interest is 5% and the market risk premium is 5%. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell’s free cash flows to be $2.4 million, $2.7 million, $3.3 million, and $3.86 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 6% rate. Hastings plans to assume Vandell’s $8.31 million in debt (which has an 7.4% interest rate) and raise additional debt…
-/1 E View Policies Current Attempt in Progress Sunland Technologies agreed to complete its IPO on a best-effort basis. The company's investment bank demanded a spread of 11 percent of the offer price, which was set at $36 per share. Three million shares were issued; however, the bank's management was overly optimistic and eventually was able to sell all of the stock for only $25 per share. What were the proceeds for the issuer and the underwriter? Proceeds to issuer 24 Proceeds to underwriting $4 eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer MacBook Air
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Question 1 of 8 <. -/ 1 View Policies Current Attempt in Progress Carla Vista Biotech management plans a $120 million IPO in which the offering price to the public will be $60 per share. The company will receive $47.50 per share. The firm's legal fees, SEC registration fees, and other out-of-pocket costs will total $550,000. If the stock price increases 14 percent on the first day of trading, what will be the total cost of issuing the securities? Total cost $ eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer I!
三= Chapter 17, Comprehensive Problem, Jets Corporation Jet Corporation currently has 120,000 shares outstanding that are selling at $55 per share. It needs to raise $800,000. Net income after taxes is $400,000. Its vice president of finance and its investment banker have decided on a rights offering, but are not sure how much to discount the subscription price from the current market value. Discounts of 12 percent, 22 percent, and 42 percent have been suggested. Common stock is the sole means of financing for the Jets Согрoration. a. For each discount, determine the subscription price, the number of shares to be issued, and the number of rights required to purchase one share. (Round to one place after the decimal point where necessary.) b. Determine the value of one right under each of the plans. (Round to two places after the decimal point.) Compute the earnings per share before and immediately after the rights offering under a С. 10 percent discount from the market price. d. By what…
EProblem 31-9 Merger gains and costs Velcro Saddles is contemplating the acquisition of Skiers' Airbags Inc. The values of the two companies as separate entities are $42 million and $19 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $435,000 per year in perpetuity. Velcro Saddles can either pay $23 million cash for Skiers' or offer Skiers' a 44% holding in Velcro Saddles. The opportunity cost of capital is 10%. ERequired: a. What is the gain from merger? (Enter your answer in millions rounded to 2 decimal places.) b. What is the cost of the cash offer? (Enter your answer in millions.) E c. What is the cost of the stock alternative? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) d. What is the NPV of the acquisition under the cash offer? (Enter your answer in millions rounded to 2 decimal places.) e. What is its NPV under the stock offer? (Do…
URGENT Consider the following information for two all- equity firms, Firm Attrex and Firm Maliwan: Attrex Maliwan Shares 4800000 175000 outstanding Marketprice 30.83 371.43 per share Attrex estimates that the value of the synergistic benefit from acquiring Maliwan is yearly positive Cash Flow of $1,085,000 in perpetuity. Maliwan has indicated that it would accept a cash purchase offer of $525.715 per share. Attrex is thinking about offering 38% of their shares in exchange. How should Attrex proceed?
34) can you please help with this question?
QUESTION 4 (a) XYZ Ltd is analysing the possible acquisition of ABC Group. The current market value of xyz Ltd is K8 million and ABC Group Pty Ltd is K6 million. It is estimated that the merger will generate a total annual after-tax cash flow of K1 million. The appropriate discount rate is for the incremental cash flow is 10%. Two offers are proposed: 1. Offer 50% of its shares 2. K6.5 million in cash. i) What is the cost of each alternative? What is the NPV of each alternative? ii) iii) Which alternative should XYZ use? iv) Which alternative should ABC want?
52 The Board of Directors of MAT Corporation is planning to make a big acquisition in the next fiscal year. The company hired a merger and acquisition (M&A) consultant to conduct a financial feasibility study using what-if analysis. The consultant and the company’s financial analyst have developed the following data table for the four top target companies from the pre-final list. Item Target Co. 1 Target Co. 2 Target Co. 3 Target Co. 4 EPS $2 $10 $5 $3 Mkt Price $40 $100 $75 $63 Based on the data table, which of the following target companies is the most expensive company to acquire using the price/earnings (P/E) ratio as the criteria? Group of answer choices Target Co. 4 Target Co. 2 Target Co. 1 Target Co. 3
Problem 31-12 Merger gains and costs Winterbourne is considering a takeover of Monkton Inc. Winterbourne has 21 million shares outstanding, which sell for $62 each. Monkton has 16 million shares outstanding, which sell for $64 each. If the merger gains are estimated at $80 million, what is the highest price per share that Winterbourne should be willing to pay to Monkton shareholders? Maximum price per share 69

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