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Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain Pizza. Projected cash flows as a result of the merger are: Year1, P1,500,000; Year2, P2,000,000; Year3, P3,000,000; Year4, P5,000,000. In addition, Western's year4 cashflows are expected to grow at a constant rate of 5% after year 4. Western's post merger beta is estimated to be 1.5 and its post-merger tax rate is 40%. The risk-free rate is 6% and the market risk premium is 4%.
How much is the projected terminal cashflow (cashflow after year 4 to infinity) from Western Mountain Pizza. Show your solution.
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- Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain Pizza. Projected cash flows as a result of the merger are: Year1, P1,500,000; Year2, P2,000,000; Year3, P3,000,000; Year4, P5,000,000. In addition, Western's year4 cashflows are expected to grow at a constant rate of 5% after year 4. Western's post merger beta is estimated to be 1.5 and its post-merger tax rate is 40%. The risk-free rate is 6% and the market risk premium is 4%. What is the total value of Western Mountain Pizza to Pizza Place? Show your solution.Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain Pizza. Projected cash flows as a result of the merger are: Year1, P1,500,000; Year2, P2,000,000; Year3, P3,000,000; Year4, P5,000,000. In addition, Western's year4 cashflows are expected to grow at a constant rate of 5% after year 4. Western's post merger beta is estimated to be 1.5 and its post-merger tax rate is 40%. The risk-free rate is 6% and the market risk premium is 4%. If Western Mountain Pizza has 5,000,000 outstanding shares and are currently selling at P13. How much is the minimum acceptable price (in total) for Western Mountain Pizza? Show your solution.Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain Pizza. Projected cash flows as a result of the merger are: Year1, P1,500,000; Year2, P2,000,000; Year3, P3,000,000; Year4, P5,000,000. In addition, Western's year4 cashflows are expected to grow at a constant rate of 5% after year 4. Western's post merger beta is estimated to be 1.5 and its post-merger tax rate is 40%. The risk-free rate is 6% and the market risk premium is 4%. What is the maximum bid price per share of Pizza Place for Western Mountain Pizza? Show your solution
- Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain Pizza. Projected cash flows as a result of the merger are: Year1, $1,500,000; Year2, $2,000,000; Year3, $3,000,000; Year4, $5,000,000. In addition, Western's year4 cashflows are expected to grow at a constant rate of 5% after year 4. Western's post-merger beta is estimated to be 1.5 and its post-merger tax rate is 40%. The risk-free rate is 6% and the market risk premium is 4%. REQUIRED: 1. What is the maximum bid price per share of Pizza Place for Western Mountain Pizza? 2. If Western Mountain Pizza has 5,000,000 outstanding shares and are currently selling at $13. How much is the minimum acceptable price (in total) for Western Mountain Pizza?Pizza Place, a national pizza chain, is considering purchasing a smallerchain, Western Mountain Pizza. Pizza Place’s analysts project that the merger will resultin incremental cash flows of $1.5 million in Year 1, $2 million in Year 2, $3 million inYear 3, and $5 million in Year 4. In addition, Western’s Year 4 cash flows are expectedto grow at a constant rate of 5% after Year 4. Assume that all cash flows occur at theend of the year. The acquisition will be made immediately if it is undertaken. Western’spost-merger beta is estimated to be 1.5, and its post-merger tax rate would be 40%. Therisk-free rate is 6%, and the market risk premium is 4%. What is the value of WesternMountain Pizza to Pizza Place?Pizza Place, a national pizza chain is considering purchasing a smaller chain, Western Mountain Pizza. Projected cash flows as a result of the merger are: Year1, $1,500,000; Year2, $2,000,000; Year3, $3,000,000; Year4, $5,000,000. In addition, Western's year4 cashflows are expected to grow at a constant rate of 5% after year 4. Western's post-merger beta is estimated to be 1.5 and its post-merger tax rate is 40%. The risk-free rate is 6% and the market risk premium is 4%. Question: How much is the projected terminal cashflow (cashflow after year 4 to infinity) from Western Mountain Pizza?
- Cupp Cake is considering purchasing a competitor, ChocoMallow. Projected cash flows as a result of the merger are: Year1, P1,450,000; Year2, P1,750,000; Year3, P2,000,000; Year4, P2,500,000. In addition, Cupcake2's year4 cashflows are expected to grow at a constant rate of 6% after year 4. Cupcake's post merger beta is estimated to be 1.2 and its post-merger tax rate is 40%. The risk-free rate is 8% and the market risk premium is 4%. 1. What is the maximum bid price that Cup Cake can offer in the acquisition 2. How much is the net advantage/disadvantage to Cup Cake if it acquires ChocoMallow's 10,000,000 shares at the current market price of P9Melissa’s Kitchen is considering acquiring Takeshi’s Takeout Corp., a small local restaurant chain. Expected net cash flows from the acquisition for the first four years of the post-merger period are: Year 1 $350,000 Year 2 $400,000 Year 3 $475,000 Year 4 $550,000 After four years, the net cash flows are expected to grow at a constant rate of 3 percent per year. If we know the following information, what is the most Melissa’s Kitchen Should pay for Takeshi’s Takeout? Melissa’s Kitchen Borrowing costs 5% above the current long-term Treasury Bond rate 10-year T-Bond Rate 2/8/23 = 3.64% Beta 2.4 Debt $4 million Stock 500,000 shares outstanding - $20 per share on 2/8/23 Tax Rate 21 percentCake World2 is considering purchasing a competitor, Cupcake2. Projected cash flows as a result of the merger are: Year1, P1,450,000; Year2, P1,750,000; Year3, P2,000,000; Year4, P2,500,000. In addition, Cupcake2's year4 cashflows are expected to grow at a constant rate of 6% after year 4. Cupcake's post merger beta is estimated to be 1.2 and its post-merger tax rate is 40%. The risk-free rate is 8% and the market risk premium is 4%. How much is the net advantage/disadvantage to Cake World2 if it acquires Cupcake2's 10,000,000 shares at the current market price of P9.
- Cuppy World is considering purchasing a competitor, Cupcake. Projected cash flows as a result of the merger are: Year 1, P1,450,000; Year 2, P1,750,000; Year 3, P2,000,000; Year 4, P2,500,000. In addition, Cupcake's year4 cash flows are expected to grow at a constant rate of 6% after year 4. Cupcake's post-merger beta is estimated to be 1.2 and its post-merger tax rate is 40%. The risk-free rate is 8% and the market risk premium is 4%. 1. Compute for the maximum bid price that Cuppy World can offer in the acquisition. 2. How much is the net advantage/disadvantage to Cuppy World if it acquires Cupcake's 10,000,000 shares at the current market price of P9?Cake World is considering purchasing a competitor, Cupcake. Projected cash flows as a result of the merger are: Year1, P1,450,000; Year2, P1,750,000; Year3, P2,000,000; Year4, P2,500,000. In addition, Cupcake's year4 cashflows are expected to grow at a constant rate of 6% after year 4. Cupcake's post-merger beta is estimated to be 1.2 and its post-merger tax rate is 40%. The risk-free rate is 8% and the market risk premium is 4%. Compute for the maximum bid price that Cake World can offer in the acquisitionCUPPY is considering purchasing a competitor, Cupcake2. Projected cash flows as a result of the merger are: Year1, P1,450,000; Year2, P1,750,000; Year3, P2,000,000; Year4, P2,500,000. In addition, Cupcake2's year4 cash flows are expected to grow at a constant rate of 6% after year 4. Cupcake's post-merger beta is estimated to be 1.2 and its post-merger tax rate is 40%. The risk-free rate is 8% and the market risk premium is 4%. How much is the net advantage/disadvantage to CUPPY2 if it acquires Cupcake2's 10,000,000 shares at the current market price of P9
