Happy Times, Incorporated, wants to expand its party stores into the Southeast. In or to establish an immediate presence in the area, the company is considering purchase of the privately held Joe's Party Supply. Happy Times currently has d outstanding with a market value of $150 million and a YTM of 4.9 percent. T company's market capitalization is $390 million and the required return on equity is percent. Joe's currently has debt outstanding with a market value of $31 million. 1 EBIT for Joe's next year is projected to be $12 million. EBIT is expected to grow a percent per year for the next five years before slowing to 2 percent in perpetuity. working capital, capital spending, and depreciation as a percentage of EBIT expected to be 8 percent, 14 percent, and 7 percent, respectively. Joe's has 1.9 mill shares outstanding and the tax rate for both companies is 21 percent. a. What is the maximum share price that Happy Times should be willing to pay for Jo (Do not round intermediate calculations and round your answer to 2 deci

In addition to footwear, Kenneth Cole Productions designs and sells handbags, apparel, and other accessories. You decide, therefore, to consider comparables for KCP outside the footwear industry. You also know the following about KCP: it has sales of $518 million, EBITDA of $55.6 million, excess cash of $100 million, $3 million of debt, EPS of $1.65, book value of equity of $12.05 per share, and 21 million shares outstanding. a. Suppose that Fossil, Inc., has an enterprise value to EBITDA multiple of 11.51 and a P/E multiple of 16.01. What share price would you estimate for KCP using each of these multiples, based on the data for KCP? b. Suppose that Tommy Hilfiger Corporation has an enterprise value to EBITDA multiple of 8.46 and a P/E multiple of 17.86. What share price would you estimate for KCP using each of these multiples based on the data for KCP? a. Suppose that Fossil, Inc., has an enterprise value to EBITDA multiple of 11.51 and a P/E multiple of 16.01. What share price would…

(EBIT-EPS analysis) A group of retired college professors has decided to form a small manufacturing corporation that will produce a full line of traditional office furniture. The investors have proposed two financing plans. Plan A is an all-common-equity alternative. Under this agreement, 1 million common shares will be sold to net the firm $20 per share. Plan B involves the use of financial leverage. A debt issue with a 20-year maturity period will be privately placed. The debt issue will carry an interest rate of 10 percent, and the principal borrowed will amount to $6 million. The marginal corporate tax rate is 21 percent. a. Find the EBIT indifference level associated with the two financing proposals. b. Prepare a pro forma income statement that proves EPS will be the same regardless of the plan chosen at the EBIT level found in part a. c. Prepare an EBIT-EPS analysis chart for this situation. d. If a detailed financial analysis projects that long-term EBIT will always be close to…

DFS Corporation is currently an all-equity firm, with assets with a market value of $ 163 million and 5 million shares outstanding. DFS is considering a leveraged recapitalization to boost its share price. The firm plans to raise a fixed amount of permanent debt (i.e., the outstanding principal will remain constant) and use the proceeds to repurchase shares. DFS pays a 21 % corporate tax rate, so one motivation for taking on the debt is to reduce the firm's tax liability. However, the upfront investment banking fees associated with the recapitalization will be 6 % of the amount of debt raised. Adding leverage will also create the possibility of future financial distress or agency costs; shown in the table here, are DFS's estimates for different levels of debt. a. Based on this information, which level of debt is the best choice for DFS? b. Estimate the stock price once this transaction is announced. 9 Debt amount ($ million) 0 10 20 30 40 50 Present value of expected distress and…