Nets & Flicks would like to take over Jeff & Bezos. Both companies are debt-free. For that, Nets & Flicks is offering to Jeff & Bezos cash and cash-like equivalents in the total amount of $73,000. Nets & Flicks currently has a total of 1,750 shares, and the market value of each share is $20. Jeff & Bezos, on the other hand, currently has a total of 2,500 shares, and the market value of each share is $28. The merger of these two companies would have a $5,000 incremental value if it is successful. The net present value of the merger from the point of view of Nets & Flicks equals Multiple Choice $3,000 $4,000 $2,000 $5,000 $6,000
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- George's Equipment is planning on merging with Nelson Machinery. George's will pay Nelson's shareholders the current value of their stock in shares of George's Equipment. George's currently has 4,600 shares of stock outstanding at a market price of $31 a share. Nelson's has 1,600 shares outstanding at a price of $38 a share. What is the value per share of the merged firm?Motorhed Inc is currently trading at $8 per share with 2.5 billion shares on issue. It announces a 2 for 7 renounceable rights issue with a subscription price of $6 per share. XYZ Superannuation owns 2% of Motorhed. One of the directors of the super fund suggests that XYZ should exercise the rights. However, the Chairman of the super fund suggests that instead of exercising the rights, they should sell the rights and keep the sales proceeds. Assume that all rights offered by Motorhed (to all shareholders) are exercised and ignore other factors. Which of the following statements best describes the change to XYZ’s wealth and its voting power if instead of exercising the rights, it follows the Chairman’s suggestion? -XYZ Superannuation’s wealth will remain the same, whereas its voting power will decrease by 0.645%. -XYZ Superannuation’s wealth will be reduced by $22.22 million, whereas its voting power will remain the same. -As discussed in the lecture, both XYZ Superannuation’s wealth…The ABC company is unlevered (that means, it currently has no debt) and is valued at $150,551. There are currently 3,562 shares outstanding. ABC is currently deciding whether to include debt in its capital structure. If ABC repurchases 347 shares, what will be the new value of the firm? Assume no taxes.
- ABC Company and XYZ Company are identical firms in all respects except for their capital structure. ABC is all-equity financed with $425,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $212,500 and the interest rate on its debt is 6 percent. Both firms expect EBIT to be $48,000. Ignore taxes. a. Rico owns $21,250 worth of XYZ's stock. What rate of return is he expecting? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Suppose Rico invests in ABC Company and uses homemade leverage. Calculate his total cash flow and rate of return. (Do not round intermediate calculations and enter your rate of return answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the cost of equity for ABC and XYZ? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. What is the WACC for ABC and XYZ? (Do not round intermediate…Warehouse Stationary is planning on merging with Whitcoulls. Warehouse's will pay Whitcoulls's shareholders the current value of their stock in shares of Warehouse's Equipment. Warehouse's currently has 4,600 shares of stock outstanding at a market price of $31 a share. Whitcoulls's has 1,600 shares outstanding at a price of $38 a share. What is the value per share of the merged firm assuming there is no synergy?Alpha Corporation and Beta Corporation are identical in every way except their capital structures. Alpha Corporation, an all equity firm, has 15,000 shares of stock outstanding, currently worth GH¢ 30 per share. Beta Corporation uses leverage in its capital structure. The market value of Beta’s debt is GH¢ 65,000 and its cost of debt is 9 percent. Each firm is expected to have earnings before interest of GH¢ 75,000 in perpetuity. Neither firm pays taxes. Assume that every investor can borrow at 9 percent per year. What is the value of Alpha Corporation? What is the value of Beta Corporation? What is the market value of Beta Corporation’s equity?
- Alpha Corporation and Beta Corporation are identical in every way except their capital structures. Alpha Corporation, an all-equity firm, has 10,500 shares of stock outstanding, currently worth $25 per share. Beta Corporation uses leverage in its capital structure. The market value of Beta’s debt is $60,500 and its cost of debt is 7 percent. Each firm is expected to have earnings before interest of $70,500 in perpetuity. Neither firm pays taxes. Assume that every investor can borrow at 7 percent per year. b) What is the value of Beta Corporation? c)What is the market value of Beta Corporation’s equity? d) How much will it cost to purchase 20 percent of each firm’s equity? e) Assuming each firm meets its earnings estimates, what will be the dollar return to each position in part (d) over the next year?ABC Company is experiencing financial difficulty and is negotiating debt restructuring with its creditors to relieve its financial stress. ABC has a P2,500,000 noted payable to XYZ Bank. The bank is considering acceptance of an equity interest in ABC Company in the form of 200,000 ordinary shares valued at P12 per share. The par value is P10 per share. How much share premium should be recognized from the debt restructuring? Group of answer choices a. 500,000 b. 100,000 c. 0Advance Wear is merging with Swish. Advance Wear has debt with a face value of $80 and Swish has debt with a face value of $40. Swish' stockholders will receive stock in the combined firm in an amount equal to the standalone market value of Swish. The premerger values of the firms given two economic states with equal probabilities of occurrence are as follows: Premerger Values: Advance Wear Assets Debt Equity Swish Stage 1 $ 160 80 80 Stage 2 $40 40 0 Market Value $80 40 40 $ 100 60 40 Assets $ 20 Debt 20 0 Equity If the merger provides no synergy, what will be the gain or loss to the current shareholders of Advance Wear? $50 30 20
- Nataro, Inc is planning on merging with Celestia Corp. Nataro, Inc with will pay shareholders the current value of their stock using shares of Nataro as the form of payment. Nataro has 5600 shares outstanding at a market price of $27.25 per share. Celestia Corp has 8,000 shares outstanding at a market price of $5.75 per share. The expected synergy created by the merger is $4200. What is the value of the merged firm (excludes cost of acquisition)? A. 205600 B. 201400 C. 159600 D. 54400 E. 68750Firm A is planning on merging with Firm B. Firm A will pay Firm B's stockholders the current value of their stock in shares of Firm A. Firm A currently has 1,800 shares of stock outstanding at a market price of $40 a share. Firm B has 1,200 shares outstanding at a price of $47 a share. What is the value per share of the merged firm?Northwest supply co. has 1209 shares outstanding at a market price of $20.65 per share. Radio Supply has 5,000 shares outstanding at a market price of $36.75 per share. Neither firm has any debt. Radio Supply is acquiring Northwest Supply. The incremental value of the acquisition is $1800. What is the value of Noethqest Supply to Radio Supply? A) 26,580 B) 30,900 C) 24,780 D) 32,700 E) 25,780