Answered: Year Earnings before taxes $150,000 2…

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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The firm is contemplating the following (base case): Vehicle acquisition cost $ 48,000 Years of useful life (economic life) 1 Tax rate 25% Required rate of return on equity 11% Required return on debt 6% Debt ratio 40% Annual revenues $ 175,000 Operating expenses (excluding depreciation) $ 115,000 1.Depreciate straight-line over the year of useful life, down to $0 over one year. The maximum dividend is paid at year end. Ignore any working capital effects. Capital charge will be based on the assets at the beginning of each year. What's the times-interest-earned?
Task 6. ANGEL Company plans to acquire a processing plant for P40 million. To finance the acquisition, the business will issue 6% preference shares with a par value of P100 per share. The selling price of the preference shares is P150. the business is subject to a 30% income tax rate, and has declared dividends to preference shares of P6 the previous year. Required: Compute the cost of preference share.
Investor A is thinking about buying Company ABC today and selling it at the end of the fourth year immediately after receiving the 4th dividend. Assuming: After-taxes, Investor A present values the Dividends paid by Company ABC at $230,000 A expects to sell the company (Terminal Value) at EOY 4 for $1,500,000 A pays tax of 20% on capital gains (the difference between the TV and the purchase price) Investor A uses an after-tax discount rate of 9%. What is the highest price investor A would be willing to pay for Company AAA today?
The firm is contemplating the following (base case): Vehicle acquisition cost $ 48,000 Years of useful life (economic life) 1 Tax rate 25% Required rate of return on equity 11% Required return on debt 6% Debt ratio 40% Annual revenues $ 175,000 Operating expenses (excluding depreciation) $ 115,000 1.Depreciate straight-line over the year of useful life, down to $0 over one year. The maximum dividend is paid at year end. Ignore any working capital effects. Capital charge will be based on the assets at the beginning of each year. What's the P&L?
Novak Company would like to start a new venture. The company is currently in the 24% marginal tax bracket and uses a 4% discount factor. The company projects that the venture will produce before-tax cash flows of $9,000 in Year 0, $20,000 in Year 1, and $33,000 in Year 2. (a) If taxable income and the before-tax cash flows are equal in the year received, compute the present value of the cash flows. (Round present value factor calculations to 3 decimal places, e.g. 1.251 and final answer to O decimal places, e.g. 58,971.) Present value
Company A is preparing a deal to acquire company B. One analyst estimated that the merger would produce 85 million dollars of annual cost savings, from operations, general and administrative expenses and marketing. These annual cost savings are expected to begin two years from now, and grow at 2.5% a year. In addition the analyst is assuming an after-tax integration cost of 0.1 billion, and taxes of 20%. Assume that the integration cost of 0.1 billion happens one year after the merger is completed (year 1). The analyst is using a cost of capital of 10% to value the synergies. Company B’s equity is trading at 2.3 B dollars (market value of equity). Company A is planning to pay a 32% premium for company B. a) Compute the value of the synergy as estimated by the analyst. b) does the estimate of synergies justify the premium? Could you show me how to work this out in an excel sheet?
Provide solution for this question
Gmail > docs.google.com a P Company is trying to decide whether to acquire S Co., P Co. expects that S will earn approximately $200,000 per year in net income over the next five years. This income is higher than the 14% annual return on assets considered to be the industry "norm." Read the above case and choose the best answer of the following: If the fair value of Hager Inc. assets equal to $1,000,000. What is the estimation of goodwill if P Co. is willing to pay for excess earnings for an expected life of 4 years? * $250,000 $240,000 $260,000 None of the answers

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Year Earnings before taxes $150,000 2 400,000 3 450,000 4 600,000 600,000