Pit Row Auto, a national auto parts chain, is considering purchasing a smaller chain, Southern Auto. Pit Row's analysts project that the merger will result in incremental net cash flows of $2 million in Year 1, $4 million in Year 2, $5 million in Year 3, and $117 million in Year 4. The Year 4 cash flow includes a terminal value of $107 million. Assume all cash flows occur at the end of the year. The acquisition would be made immediately, if it were undertaken. Southern's post-merger beta is estimated to be 2.0, the risk-free rate is 8 percent, and the market risk premium is 4 percent. Both firms are all-equity financed. What should the analysts' use as the discount rate as they value Southern for Pit Row? Question 14 options:     16%       0%       12%       20%   1

Exhibit 30 (This relates to question below) Assume that Baps Corp. is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5 million. If the project is undertaken, Baps would terminate the project after four years. Baps's cost of capital is 13 percent, and the project has the same risk as Baps's existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 NOK10,000,000 Year 1 Year 2 $.13 NOK15,000,000 Year 2 Year 3 The current exchange rate of the Norwegian kroner is $.135. Baps's exchange rate forecasts for the Norwegian kroner over the project's lifetime are listed below: $.14 NOK17,000,000 Year 3 Year 4 $.12 NOK20,000,000 Year 4 $.15 Refer to Exhibit 30. What is the net present value of the Norwegian project?

10. RiverRocks​ (whose WACC is 12.7​%) is considering an acquisition of Raft Adventures​ (whose WACC is 14.8​%). The purchase will cost $100.2 million and will generate cash flows that start at $15.9 million in one year and then grow at 4.5% per year forever. What is the NPV of the​ acquisition?   The net present value of the project is ​$____million. (Round to two decimal​ places.)

Wansley Lumber is considering the purchase of a paper company which would require an initial investment of $300 million. Wansley estimates that the paper company would provide net cash flows of $40 million at the end of each of the next 20 years. The cost of capital for the paper company is 16%. a. Should Wansley purchase the paper company? -Select- V b. Wansley realizes that the cash flows in Years 1 to 20 might be $27 million per year or $53 million per year, with a 50% probability of each outcome. Because of the nature of the purchase contract, Wansley can sell the company 2 years after purchase (at Year 2 in this case) for $280 million if it no longer wants to own it. Given this additional information, does decision-tree analysis indicate that it makes sense to purchase the paper company? Again, assume that all cash flows are discounted at 16%. -Select- V c. Wansley can wait for 1 year and find out whether the cash flows will be $27 million per year or $53 million per year before…

Firm Valuation Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz, and the acquisition would allow Schultz to better control its material supply. The current cash flow from assets for Arras is $8.1 million. The cash flows are expected to grow at 5 percent for the next five years before leveling off to 2 percent for the indefinite future. The cost of capital for Schultz and Arras is 9 percent and 7 percent, respectively. Arras currently has 3 million shares of stock outstanding and $25 million in debt outstanding.   What is the maximum price per share Schultz should pay for Arras?

Company A is preparing a deal to acquire company B.  One analyst estimated that the merger would produce 85 million dollars of annual cost savings, from operations, general and administrative expenses and marketing. These annual cost savings are expected to begin two years from now, and grow at 2.5% a year. In addition the analyst is assuming an after-tax integration cost of 0.1 billion, and taxes of 20%. Assume that the integration cost of 0.1 billion happens one year after the merger is completed (year 1). The analyst is using a cost of capital of 10% to value the synergies.    Company B’s equity is trading at 2.3 B dollars (market value of equity). Company A is planning to pay a 32% premium for company B.    a)   Compute the value of the synergy as estimated by the analyst. b)  does the estimate of synergies justify the premium? Could you show me how to work this out in an excel sheet?

Involves the purchase of a lumber mill operation located in Nova Scotia. You have estimated the initial investment as $1,000,000 and the annual pre-tax cash flow over the next 10 years as $200,000 at which point the operation will be obsolete. If GBEI decides to invest in the lumber mill operation, it will be financed using the same proportions of debt and equity that GWEI currently uses. You have collected information on a publicly-traded lumber products company whose primary line of business is similar to GBEI’s lumber mill operation – this has led you to recommend a discount rate of 11.27% for this investment. Assume straight line depreciation. 1. Calculate the NPV, Payback Period, and Profitability Index of the lumber mill operation.

RiverRocks (whose WACC is 12.7%) is considering an acquisition of Raft Adventures (whose WACC is 15.3%). The purchase will cost $100.5 million and will generate cash flows that start at $14.1 million in one year and then grow at 4.2% per year forever. What is the NPV of the acquisition? The net present value of the project is $ million. (Round to two decimal places.)

What is the NPV, IRR, and Payback period for the acquisition and what should Atlantic do?

Please answer multi-choice question in photo.