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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This solution provides answers to various finance-related questions. It determines the 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 $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 ...
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