Financial Management: Theory & Practice
16th Edition
ISBN: 9781337909730
Author: Brigham
Publisher: Cengage
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Chapter 22, Problem 12MC
Summary Introduction
Case summary: Company HH is a regional hardware chain which is considering acquiring LL. The boss of the company asked to place a value on target. There are 20 million shares @$12 per share with LL. Bet is 1.25 for LL’s stock with risk free rate 5.5% and market risk premium is 4%. 20% of capital structure of LL is financed with debt with 8% interest rate. Federal plus state tax rate is 25% and will remain same even after acquisition. The management of the company HH is asking various questions about mergers and also asking to perform merger analysis based on the given details of Company LL.
To determine: The term holding companies and their advantages and disadvantages.
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IDX Technologies is a privately held developer of advanced security systems based in Chicago. As part of your business development strategy, in late 2008 you initiate discussions with IDX's founder
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• Excess cash: $106 million
• Shares outstanding: 50 million
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Expected FCF in 2010: $57 million
• Future FCF growth rate beyond 2010: 5%
●
Weighted-average cost of capital: 9.4%
The enterprise value in 2008 is $
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Happy Times, Incorporated, wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe's Party Supply. Happy Times currently has debt outstanding with a market value of $220 million and a YTM of 5.8 percent. The company's market capitalization is $460 million and the required return on equity is 12 percent. Joe's currently has debt outstanding with a market value of $34.5 million. The EBIT for Joe's next year is projected to be $14 million. EBIT is expected to grow at 10 percent per year for the next five years before slowing to 3 percent in perpetuity. Net working capital, capital spending, and depreciation as a percentage of EBIT are expected to be 9 percent, 15 percent, and 8 percent, respectively. Joe's has 2.25 million shares outstanding and the tax rate for both companies is 23 percent. a. What is the maximum share price that Happy Times should be willing to pay for…
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Chapter 22 Solutions
Financial Management: Theory & Practice
Ch. 22 - Prob. 1QCh. 22 - Prob. 2QCh. 22 - Prob. 3QCh. 22 - Prob. 4QCh. 22 - Prob. 5QCh. 22 - Prob. 1PCh. 22 - Prob. 2PCh. 22 - Prob. 3PCh. 22 - Hasting Corporation is interested in acquiring...Ch. 22 - Prob. 5P
Ch. 22 - Prob. 6PCh. 22 - Prob. 7SPCh. 22 - Prob. 1MCCh. 22 - Hager’s Home Repair Company, a regional hardware...Ch. 22 - Hager’s Home Repair Company, a regional hardware...Ch. 22 - Hager’s Home Repair Company, a regional hardware...Ch. 22 - Prob. 5MCCh. 22 - Prob. 6MCCh. 22 - Prob. 7MCCh. 22 - Prob. 8MCCh. 22 - Prob. 9MCCh. 22 - Prob. 10MCCh. 22 - Prob. 11MCCh. 22 - Prob. 12MC
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