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

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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Problem C: Liquidity RatiosABC has P400,000 cash, P200,000 short‐term investments, P500,000 receivables, and P900,000 inventories. It has trade payables ofP600,000 and short‐term loans of P900,000. It is planning to acquire another short‐term loan. However, the first loan requires ABCto maintain a minimum current ratio of 125%.Required:1. Current ratio before additional loan*2. Current ratio if ABC borrowed P300,000*3. Current ratio if ABC borrows P600,000*
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A company has EBITDA of $100m. If a private equity fund acquires this company in a Leveraged Buy-Out for an EBITDA multiple of 3x, borrowing 50% of the purchase price, and sells the company for a multiple of 5x when the company's EBIDTA has increased to $150m, what will be the value of the equity investment in the company upon exit? What is it as a multiple of the initial equity investment? 8)
You are given the following information concerning a firm: Assets required for operation: $5,000,000 Revenues: $8,400,000 Operating expenses: $7,900,000 Income tax rate: 40%. Management faces three possible combinations of financing: 100% equity financing 30% debt financing with a 6% interest rate 60% debt financing with a 6% interest rate What is the implication of the use of financial leverage when interest rates change?
Give typing answer with explanation and conclusion
MM Model with Zero Taxes An unlevered firm has a value of $575 million. An otherwise identical but levered firm has $200 million in debt. Under the MM zero-tax model, what is the value of the levered firm? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to the nearest whole number. million
Break-even EBIT (with and without taxes). Alpha Company is looking at two different capital structures, one an all-equity firm and the other a levered firm with $1.84 million of debt financing at 15% interest. The all-equity firm will have a value of $4.6 million and 460,000 shares outstanding. The levered firm will have 276,000 shares outstanding. a. Find the break-even EBIT for Alpha Company using EPS if there are no corporate taxes. b. Find the break-even EBIT for Alpha Company using EPS if the corporate tax rate is 40%. c. What do you notice about these two break-even EBITS for Alpha Company? ... a. What is the break-even EBIT for Alpha Company using EPS if there are no corporate taxes? (Round to the nearest dollar.)
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…
MM Model with Zero Taxes An unlevered firm has a value of $625 million. An otherwise identical but levered firm has $75 million in debt. Under the MM zero-tax model, what is the value of the levered firm? Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to the nearest whole number. LA million
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please answer the question as in attached file asap. thanks
Andy has borrowed $370,000 on margin to buy Lowe`s Companies Inc., which is now trading at $203 per share. With this transaction, his initial percentage margin is 35%. His broker, Shannon, states, and Andy agrees, that the maintenance margin is 25%. Based on the given information, what is the equity value in account? A. $108,301 B. $147,621 C. $199,231 D. $232,650

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