EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 16, Problem 18P
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To determine: The annual financing cost.
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Write in memo format a response to your Manager, based on the information presented below for the Duncan Company and also based on your additional research. Your Manager has advised you to make any assumptions where necessary.
Duncan Company is a large manufacturer and distributor of cake supplies. It is based in United Kingdon (Headquarters) It sends supplies to firms throughout the United States and the Caribbean . It markets its supplies through periodic mass mailings of catalogues to those firms. Its clients can make orders over the phone and Duncan ships the supplies upon demand. The main competition for Duncan’s comes from one U.S. firm and one Canadian firm. Another British firm has a small share of the U.S. market but is at a disadvantage because of its distance. The British firm’s marketing and transportation costs in the U.S. market are relatively high. a) Duncan Company plans to penetrate either the Canadian market or two other Caribbean Countries (Jamaica and Haiti). What…
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A sporting goods manufacturer has decided to expand into a related business. Management estimates that to build and staff a facility of the desired size and to attain capacity operations would cost $450 million in present value terms. Alternatively, the company could acquire an existing firm or division with the desired capacity. One such opportunity is a division of another company. The book value of the division’s assets is $250 million and its earnings before interest and tax are presently $50 million. Publicly traded comparable companies are selling in a narrow range around 12 times current earnings. These companies have book value debt-to-asset ratios averaging 40 percent with an average interest rate of 10 percent.
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Chapter 16 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
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