2. Your firm is considering the purchase of 60% of a public firm, WinterCo, that has EBITDA of $1,000,000. Your small position in an identical private firm has a value of 5X EBITDA. What is the most you can pay for WinterCo? Market Transaction Multiple 6X Liquidity Discount 25% Peer Multiple 5X Control Premium 40% Industry Multiple 5.5X

2. Your firm is considering the purchase of 60% of a public firm, WinterCo, that has EBITDA of $1,000,000. Your small position in an identical private firm has a value of 5X EBITDA. What is the most you can pay for WinterCo? Market Transaction Multiple 6X Liquidity Discount 25% Peer Multiple 5X Control Premium 40% Industry Multiple 5.5X

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 7P

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A PE firm has just offered to purchase a Facilties Services firm for $60/share. If the Facilities Services firm has 3 million shares outstanding, long-term debt of $90 million and Excess Cash of $20 million, what is Enterprise Value implied by the offer? O $200 million $250 million O $270 million $180 million $290 million
7. Your company is currently contemplating whether to buy Hot House, a national chain of computer systems consultants based in California. Your job is to estimate the market value of the equity in Hot House. To accomplish this task, you have gathered the following information. The estimated FCFF generated by Hot House for each of the next five years are as follows. CFF 1 $2,400 2 3 4 5 $2,910 $3,452 $4,452 $5,352 Subsequent to year 5, you estimate that the cash flows will grow at 6% indefinitely. Currently, the company has $5 million of debt outstanding, but that debt balance is expected to increase by 5% at the end of each year. Thus, the current debt balance of $5 million will increase to $5.25 million at the end of year 1, $5.5125 million at the end of year 2, etc. Fortunately, the before-tax cost of debt is expected to remain stable at 12%. Finally, you estimate that the required return on the unlevered equity is 16%. If the company has 1 million shares outstanding, what is the…
Consider two hypothetical firms: Firm U, which uses no debt financing, and Firm L, which uses €10,000 of 12 percent debt. Both firms have €20,000 in assets, a 40 percent tax rate, and an expected EBIT of €3,000. Construct partial income statements, which start with EBIT, for the two firms. Firm U Firm L Assets €20,000 €20,000 Equity €20,000 €10,000 EBIT € 3,000 € 3,000 INT (12%) ? ? EBT ? ? Taxes (40%) ? ? NI € ? € ?
Consider two hypothetical firms: Firm U, which uses no debt financing, and Firm L, which uses €10,000 of 12 percent debt. Both firms have €20,000 in assets, a 40 percent tax rate, and an expected EBIT of €3,000. Construct partial income statements, which start with EBIT, for the two firms. Answers: Firm U Firm L Assets €20,000 €20,000 Equity €20,000 €10,000 EBIT € 3,000 € 3,000 INT (12%) -------- -------- EBT Taxes (40%) --------- --------- NI €-------- €---------
Hello I need help with a queshtion in cooperate fiance and i need a calucaltion to this step by step please and an explination An all-equity firm expects its EBIT to be $330,000 every year, in perpetuity. Its cost of unleavened equity is 11.9%, its cost of debt is 5.4% and it faces a corporate tax rate of 22%. The firm plans to adjust its capital structure by issuing $500,000 in perpetual debt and using the proceeds to repurchase shares. Assume the EBIT is not affected by this recapitalization. What is the firm’s cost of levered equity after the recapitalization?
You have been tasked with the responsibility of calculating the WACC for Meeks Investments Limited and Hall Developments Limited. The risk free rateis currently 4% and the market risk premium is 6.5%. The details for both companies are presented in the table below. the tax rate is 25%. MeeksInvestments Limited Hall Developments Limited Value of Common Equity $1,500,000 $3,000,000 Beta 2.18 1.52 Value of preferred Equity $1,000,000 $500,000 Preffered Dividends 4.50 $7.60 Priceof Preffered Stock $60 $80 Price of Bonds $970 $1,160 Coupon Rate (Paid semi- annually) 8% 11% par value of bonds $1,000 $1,000 years to Maturity 8 12 Value of Debt $2,500,000 $1,500,000 Use the information in the table above to calculate the WACC for both companies
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Give only typing answer with explanation and conclusion U and L are two firms with the same EBIT of $115,000. They are identical in every respect except firm L has a debt of $900,000 at 6% rate of interest. The cost of equity of firm U is 8% and that of firm L is 10%. Assume that arbitrage principle will be applied in this setting and it is possible to make an arbitrage profit (surplus). Also, all earnings streams are perpetuities, taxes are ignored and both firms distribute?
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