You have valued a business, using discounted cash flow models, at $250 million for a private sale. The business, which does make money, had revenues of $200 million in the most recent year. (The average firm has revenues of $10 million.) How much of a liquidity discount would you apply to this firm: a. Based on the Silber regression? b. Based on correcting the average discount (25%) for the size of the firm
Q: Deli Bhd introduces a new product line to expand its market in gaining wide market shares. Deli Bhd…
A: The initial cost of investment = capital investment + working capital investment = 1,500,000 +…
Q: Consider investing your savings in a coupon bond with the following properties: Maturity: 5 years…
A: Bond It is a financial instrument that pays a series of coupon payments at equal interval till the…
Q: Five years ago you borrowed $200,000 to finance the purchase of a $240,000 house. The interest rate…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: What is the net present value of this project?
A: Information Project: Fixed asset cost = $157,000 Annual Sales = $98,000 Variable cost = $27,400…
Q: StangWay Corp. stock is trading for $23 per share. StangWay has 24 million shares outstanding and a…
A: Data given: Current price = $23 Outstanding share = 24 million Market debt equity ratio = 0.59…
Q: I need the show your work version not excel answer. Please show your work. Thank you
A: Future value of a present amount With present value (PV), interest rate (r) and period (n), the…
Q: Underwriting Spread (LO15-2) Solar Energy Corp. has $4 million in earnings with four million shares…
A: Let us calculate EPS (earnings per share)EPS = Total earnings/number of shares outstanding=…
Q: Complete the table below (Round to the nearest thousands) Occupancy Rate $ Rental Fee $4,000 75%…
A: The table that is required to filled asks us to calculate the rental fee given the % of occupancy…
Q: Your firm has semi-annual floating rate payment obligations for the next two years computed on a…
A: Swaps: Swaps are a type of derivative contract where one party receives a floating interest rate and…
Q: The DISADVANTAGES of equity finance are KELEMAHAN kewangan ekuiti i. Entrepreneur…
A: A firm can obtain financing mainly in two ways. One is equity financing and the other one is debt…
Q: If Annie buys the bond today at its $1,000 par value and holds it for exactly 3 years, at which time…
A: Given, The face value of bond is $1000 Interest rate is 8%
Q: Mickey & Minnie have $41 million in cash. Before they retire, they want the $41 million to grow to…
A: We will use the concept of time value of money here. As per the concept of time value of money the…
Q: Today, a firm has a stock price of $14.26 and an EPS of $1.15. Its close competitor has an EPS of…
A: The method of comparables is used to find the equity value of a company by equating its ratios to…
Q: Can you estimate the annual rate of return to grow $5,000 to $20 million in 51 years? Show cash…
A: The following information is provided.FV = 20,000,000PV = 5000n = 51 years Annual rate of return can…
Q: As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with…
A: Sales revenues = $11,900 Operating costs = $5,430 Tax rate = 20% Year 1 cash flow = ? Free cash…
Q: our company, RMU Inc., is considering a new project whose data are shown below. Under the new tax…
A: Cash flow is the amount of cash that comes in (cash inflow) and that goes out (cash outflow) of a…
Q: You're evaluating various investment opportunities and you have the following information about five…
A: The Sharpe ratio is used to measure the return of a portfolio that has been adjusted for risk. An…
Q: Collins Systems Inc. is trying to develop an asset-financing plan. The firm has $300,000 in…
A: Given: Particulars Amount Temporary Current assets $300,000 Permanent Current asset…
Q: magine you have a credit card balance of $1,000 that you would like to pay off within one year. The…
A: The credits cards are settled on the monthly payments and are paid by monthly payments and these…
Q: What is the net present value of this project
A: Information Provided: Fixed asset cost = $157,000 Project Annual Sales = $98,000 Variable cost =…
Q: The Bloomberg screen below shows the Nasdaq Index price over the last year. Desc the technical…
A: The chart gives one year candlestick data along with volumes traded (the part below). The technical…
Q: A new city truck can be purchased for $2,400,000. Its expected useful life is six years, at which…
A: Present Value: The present value (PV) is the present sum of a series of fixed payments. The series…
Q: odaFizz paid a dividend of $2 per share last year; its dividend has been growing at a rate of 2% per…
A: The dividend is paid to equity shareholders as a share in the profit. The dividends are the amount…
Q: Why do equity investors often use borrowed funds? Explain positive and negative financial leverage…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Caspian Sea Drinks is considering the purchase of a new water filtration system produced by Rube…
A: The incremental cash flow measures the effect of a new project on the cash flows of the company. It…
Q: e ‘Yield Curve’, also known as the ‘Term Structure of Interest Rates’, can take several different…
A: In determining the interest rate in near future or over long period yield curve is very important.…
Q: ou sell short 18 shares of Wells Fargo &Co that are currently selling at $54 per share. You post the…
A: A short seller borrows securities from a broker in order to sell them now. He provides an initial…
Q: 2. Explain why the expected return of a corpor bond does not equal its yield to maturity.
A: The expected return on bond is what we are expecting the return from bond it depends on the market…
Q: The owner of a building that costs $100,000 who wishes to determine the annual rent necessary to…
A: Given: Present value =$100,000 Return = 10% Years =10
Q: In 6 years Dawn wants her current savings of $3700 to grow to $7300? What per annum rate, compounded…
A: Current saving (P0) = $3700 Future value after 6 years (FV) = $7300 Annual rate (r) = ? Period (p) =…
Q: Suppose that you won $1,500,000 in the Illinois state lottery. It will be paid to you over 20 years…
A: An annuity is end of year equal payments made for a fixed period of time at a specified interest…
Q: Please view the following video before answering this question. Video Example 4.3 Click here to…
A: Present equivalent cost of investment would be equivalent cost based on the time period and interest…
Q: What is private mortgage insurance? How does it work to protect a lender from risk? What are the…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: Suppose that the market can be described by the following three sources of systematic risk with…
A: Equilibrium rate refers to the long-term exchange rate that is equal to the purchasing power…
Q: Stardom Manufacturing Company (SMC) is in the construction industry for many years. Recently, the…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: Choose three common investment ratios in real estate. Explain what the ratio measures and why an…
A: The answers to the question are below. Choose three common investment ratios in real estate.…
Q: The lower the MARR (minimum attractive rate of return), the higher the price that a company should…
A: MARR is often known as the hurdle rate in finance. Now any type of investment is associated with…
Q: Bryan Delegacy Berhad is planning to add additional capital through initial public offering (IPO).…
A: Seed also called Angel investors frequently contribute initial investment (also known as seed…
Q: us compound interest with QUARTERLY compounding at a rate of 6% APR. We set a goal of saving up…
A: Annuity It is a series of equal periodic payment at equal interval over a specified period. In…
Q: Your bank is offering a term deposit that will earn investors an EAR of 12.00%. Your manager asks…
A: EAR (Effective Annual Rate) = (1 + (APR / n))n - 1 Where n = Number of compounding in a year
Q: inance what is a pillar of finance?
A: Finance as a subject and as a topic is a vast field and subject and includes different sub topics…
Q: Q6) Which of the following best suits this description: “It is a summary of the net assets and worth…
A: Balance sheet is a type of financial statement which will reflect all the assets and the liabilities…
Q: Tom O'Brien has a 2-stock portfolio with a total value of $100,000. $55,000 is invested in Stock A…
A: Given: Total value =$100,000 Invested in stock A = $55,000 Stock A Beta = 0.75 Stock B beta = 1.79
Q: How does pe effect the stock market
A: PE reflects the price to earning ratio. It is the ratio of current market price to the earning for…
Q: What is the salvage cash flow for a piece of equipment given the following information. The…
A: initial book value of equipment = $226,000 Life = 8 years Depreciation charged for 4 years Sale…
Q: Suppose rRF = 3%, rM = 8%, and rA = 7%. Calculate Stock A's beta. Round your answer to one…
A: We will use the CAPM model here. CAPM is the capital asset pricing model. This model describes the…
Q: The payment for a certain loan was arranged such that Dino will pay $5,500 every month for the first…
A: Present Value: The present value (PV) is the present sum of a series of fixed payments. The series…
Q: Foxtrot Inc., a Canadian, company, has just entered into a one year currency swap contract with a…
A: Swaps: Swaps are contracts are derivatives that are used to as a hedging tool. All swaps are…
Q: A man applied for a car loan in a local financing bank which charges a rate of interest of 18%.…
A: The discount on the loan depends on the interest rate that is prevailing on the loan. Due to the…
Q: Find the periodic withdrawals PMT for the given annuity account. HINT [See Quick Example 4.] (Assume…
A: The periodic withdrawals depend on the the period and interest rate of annuity and initial amount of…
“You have valued a business, using discounted cash flow models, at $250 million for a private sale. The business, which does make money, had revenues of $200 million in the most recent year. (The average firm has revenues of $10 million.) How much of a liquidity discount would you apply to this firm:
a. Based on the Silber regression?
b. Based on correcting the average discount (25%) for the size of the firm?”
Step by step
Solved in 2 steps
- Select one company of the 30 companies that make up the Dow Jones Industrial Average (DJIA). a. Provide a brief history of the company chosen from the 30 companies of the DJIA.b.Describe the Dividend Discount Model (DDM). Using the DDM value the companyc.Provide a brief description of the Residual Income Model. Using the RIM value, the companyd.Describe the Free Cash Flow Model (FCF). Using the FCF value the companye. Describe the P/E ratio for the company and determine the expected price of the company using Earnings, Cash Flow and Salesf.summary of the detailed fundamental analysis for the company, provide a current status of the company and then explain if you would invest in the company at the current price. Explain why you made the investment decision and at what price range you would invest money in this company.K-Life financial services Limited uses risk-adjusted return on capital (RAROC) to measure performance on several aspects. In this regard, imagine that an investment officer wants to execute a transaction with the following characteristics: Probability of default (PD) = 30 basis points Loss given default (LGD) = 55% Exposure at default (EAD) = K 1.45 million Expected loss (EL) = K 2,750 This is a loan to a company in the Agro industrial. The firm’s economic capital (EC) model is based on the 99% confidence level, with an average standard deviation of 2.15%. The risk-free rate of return is 6%. Assume that the bank has set a RAROC hurdle rate of 15% and this transaction has a net profit of K10, 500. REQUIRED: Compute the K-life’s risk-adjusted rate of return on this transaction. Now assume that K-life could also have made a loan for the same amount to a firm in the service industry, and that the standard deviation for economic capital purposes in this case is 1.29%. Compute the bank’s…A firm has $ 1.2 million in current assets and $ 1 million in current liabilities. If the company uses $ 0.5 million of cash to pay part of its accounts payable, what will happen to the “current ratio”?
- You have been asked by your employers to demonstrate your knowledge in business valuation process, by analyzing the value of Best Group Savings and Loans Company (BGSLC). The company paid a dividend of GH¢ 250,000 this year. The current return to shareholders of companies in the same industry as BGSLC is 12%, although it is expected that an additional risk premium of 2% will be applicable to BGSLC, being a smaller and unquoted company. Compute the expected valuation of BGSLC, if: The current level of dividend is expected to continue into the foreseeable future The dividend is expected to grow at a rate 4% par into foreseeable future The dividend is expected to grow at a 3% rate for three years and 2% afterwardsUsing the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 5 percent and its return on assets (investment) is 22.5 percent. What is its assets turnover? (Round your answer to 2 decimal places.) b. If the Butters Corporation has a debt-to-total-assets ratio of 55.00 percent, what would the firm's return on equity be? (Input your answer as a percent rounded to 2 decimal places.) c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 50.00 percent? (Input your answer as a percent rounded to 2 decimal places.)Please answer Fast in typing. I ll upvote Thank You Based on the following information about Banks A and B, compute for each the return on assets (ROA), return on equity (ROE), and leverage ratio. a. Bank A has net profit after taxes of $1.8 million and the following balance sheet: The return on assets (ROA) for Bank A: ___% The return on equity (ROE) for Bank A: ___% The leverage ratio for Bank A: ___ Bank B has net profit after taxes of $1 million and the following balance sheet: Instructions: Enter your responses rounded to two decimal places.) The return on assets (ROA) for Bank B: ___% The return on equity (ROE) for Bank B: ___% The leverage ratio for Bank B: ___
- A firm has $600,00 in current assets and $150,000 in current liabilities. If it uses cash to pay $50,000 in accounts recievalbes will the current ratio increase or decraese? Will the net working capital increase or decrease or stay the same? Why?Can a Company with this Financial Analysis of Data be successful with obtaining a $500.0 million loan? Justify. Image Attached.Barry’s Superstore wishes to prepare financial plans. Use the financial statements on the next page and the other information provided below to prepare the financial plans. The following financial data are also available: (1) The firm has estimated that its sales for next year will be $130,000. (2) The firm expects to pay $30,000 in cash dividends. (3) The firm wishes to maintain a minimum cash balance of $25,000. (4) Accounts receivable represent approximately 20% of annual sales. (5) The firm’s ending inventory represents 60% of Cost of Goods Sold. (6) A new machine costing $15,000 will be purchased next year. (7) Accounts payable will increase by 5%. (8) Unearned Revenue will be earned. (9) Notes Payable would decrease by $5000. (10) Short-Term Investments and common stock will remain unchanged. Requirement: a. Prepare a pro forma income statement for the year ended December 31, 2021, using the percent-of-sales method. Tax Rate is expected to be 15%. b. Prepare a pro forma balance…
- Barry’s Superstore wishes to prepare financial plans. Use the financial statements on the next page and the other information provided below to prepare the financial plans. The following financial data are also available: (1) The firm has estimated that its sales for next year will be $130,000. (2) The firm expects to pay $30,000 in cash dividends. (3) The firm wishes to maintain a minimum cash balance of $25,000. (4) Accounts receivable represent approximately 20% of annual sales. (5) The firm’s ending inventory represents 60% of Cost of Goods Sold. (6) A new machine costing $15,000 will be purchased next year. (7) Accounts payable will increase by 5%. (8) Unearned Revenue will be earned. (9) Notes Payable would decrease by $5000. (10) Short-Term Investments and common stock will remain unchanged. Requirement: Prepare a pro forma income statement for the year ended December 31, 2021, using the percent-of-sales method. Tax Rate is expected to be 15%. Prepare a pro forma balance…If you had $100,000 available for investing, which of these companies would you choose to invest with? Support your answer with analysis of free cash flow, based on the data provided, and include in your decision whatever other reasoning you chose to utilize.A firm wants to strengthen its financial position. Which of the following actions would increase its current ratio? 1. b. Reduce the company's days' sales outstanding to the industry average and use the resulting cash savings to purchase plant and equipment. 2. d. Borrow using short-term debt and use the proceeds to repay debt that has a maturity of more than one year. 3. e. Issue new stock and then use some of the proceeds to purchase additional inventory and hold the remainder as cash. 4. a. Use cash to increase inventory holdings. 5. c. Use cash to repurchase some of the company's own stock.