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    Annual Cash Flow Discount Rate Estimated Values

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    1.) If Company A is acquiring Company B, how do I complete the following table?

    Table 1 Net Annual Cash Flow Discount Rate Estimated Value
    Company A $42,274 0.09
    Company B $13,658 0.12
    "Before A+B"
    Benefits -------------------------- ---------------------- ---------------------
    Less Currency Risk $1,850 0.05
    Cost Reduction $2,040 0.12
    Long-term growth $4,320 0.18
    "After AB" ---------------------- ----------------------- ---------------------

    2.) Firm X is considering the acquisition of firm Y for cash. Given the information supplied in the table below:
    a.) What price should firm x pay for firm Y if it gives 1/3 of the synergistic benefits to firm Y shareholders?
    b.) Complete the table given the price determined in (a)

    Table 2 Firm X Firm Y Synergy XY
    Beginning Value $470,000 $114,000 $78,000
    Shares Outstanding 'before' 34,800 12,000 ------------------
    Price paid for Y --------------- -----------------
    Value of XY after merger --------------- ------------------ -----------------
    Shares outstanding "After" 0 0 ------------------- 34,800
    PPS for XY ----------------- ------------------ -----------------

    3.) Firm X is considering the acquisition of firm Y for shares. Using the information supplied in table 2 (above):

    a.) Complete table 3 using the # of new shares determined in (a)
    b.) How many new shares should be issued to achieve a target price for XY stock of $15 per share?

    Table 3 Firm X Firm Y Synergy XY
    Beginning value
    Shares outstanding "before" ----------------- -------------------
    PPS before
    ------------------ -------------------
    New shares to Y shareholders ------------------- ---------------- --------------------
    Total shares "After" ----------------
    New PPS for XY ------------------ ------------------ ------------------ $15.00

    4. Using data from finance.yahoo.com 5year (5y) charts, how do I complete the following chart?

    Last closing price end of year S&P 500 Year by year change Apollo Group Year by year change
    2002 -------------- -------------
    2003
    2004
    2005
    2006

    5. If I use the data in the chart above, how do calculate the beta for Apollo Group and input year to year changes in decimal format (not %)

    6. With the following data for ABC Inc., a.) How do I calculate the cost of debt (Rd)? b) The cost of equity (Rr)? And c.) The weighted average cost of capital (WACC)?

    Rb= 9.7%
    Rrf= 4.64%
    Debt=$6,540,000
    Beta= 2.4
    Tc+ 15%
    Rm= 9%
    Equity= $3,210,000

    7. How do I complete the following table? Using the equivalent annual cost method, which project is a better investment?
    Annual costs
    Item Initial coast 1 2 3 PV at 7.0% Equivalent annual annuity
    Project A $18,000 $6,000 $6,000 $6,000
    Project B $ 12,000 $9,000 $9,000 ----------

    8. If Company M makes High tech scanners and sells them for $90,000 each with a gross profit margin of 40% and it has a fixed cost of $4,500,000 per month.

    a.) What's the contribution margin of each scanner sold?
    b.) How many scanner units does Company M sell each month to break even?

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    https://brainmass.com/business/annuity/annual-cash-flow-discount-rate-estimated-values-159071

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    Attached are the Word files with answers and explanations and Excel file that shows the computations themselves.

    1.) If Company A is acquiring Company B, how do I complete the following table?

    Table 1 Net Annual Cash Flow Discount Rate Estimated Value
    Company A $42,274 0.09 $38,783.49
    Company B $13,658 0.12 $12,194.64
    "Before A+B" $55,932 0.10 $50,978.13
    Benefits -------------------------- ---------------------- ---------------------
    Less Currency Risk $1,850 0.05 $1,761.90
    Cost Reduction $2,040 0.12 $1,821.43
    Long-term growth $4,320 0.18 $3,661.02
    "After AB" ---------------------- ----------------------- ---------------------

    We could use PV for estimation. You can see the computation part in Excel file.

    2.) Firm X is considering the acquisition of firm Y for cash. Given the information supplied in the table below:
    a.) what price should firm x pay for firm Y if it gives 1/3 of the synergistic benefits to firm Y shareholders?

    The price would be 2/3 of the nominal price.

    b.) Complete the table given the price determined in (a)

    Table 2 Firm X Firm Y Synergy XY
    Beginning Value $470,000 $114,000 $78,000
    Shares Outstanding 'before' 34,800 12,000 ------------------
    Price paid for ...

    Solution Summary

    This solution provides answers to various finance-related questions. It determines the annual cash flow discount rate estimated values.

    $2.19

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