The discount rate Main article: Discount rate The rate used to discount future cash flows to their present values is a key variable of this process. A firm’s weighted average cost of capital (after tax) is often used‚ but many people believe that it is appropriate to use higher discount rates to adjust for risk or other factors. A variable discount rate with higher rates applied to cash flows occurring further along the time span might be used to reflect the yield curve premium for long-term
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$42 per share. Assume the expected rate of return on Federated’s stock is 18 percent. • Taxes: Federated’s marginal tax rate is Tc = .35 What are the key assumptions underlying your calculation? For what type of project would Federated’s weighted-average cost of capital be the right discount rate? 2. Suppose Federated Junkyards decides to move to a more conservative debt policy. A year later its debt ratio is down to 15 percent (D/V =.15 ). The interest rate has dropped to 8.6 percent. Recalculate
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| Radio One‚ Inc. | Memo To: Mr. Alfred Liggins III From: Team 5 Date: [ November 22‚ 2011 ] Re: Clear Channel Communications Inc. acquisitions Mr. Liggins The recent merger between Clear Channel Communications Inc. and AMFM has presented a rare opportunity for Radio One‚ Inc. The proposed divestiture of Clear Channel will be the largest in the history of the industry. Radio One‚ Inc. can acquire 12 established urban stations in the top 50 markets‚ which rarely become available. Market
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Radio One INC. This case involves an expansion of Radio One Inc. The company is evaluating several stations that are currently available due to a divesture that Clear Channel was required to complete. Radio One’s strategy is to be the number one urban- oriented music‚ entertainment‚ and information to African-American in as many major markets possible. With this opportunity Radio One can acquire an additional 12 stations in areas they have not been able to search before. The results of the expansion
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Radio one analsys 1) Why does Radio One want to acquire the 12 urban stations from Clear Channel Communications in the top 50 markets along with nine stations in Charlotte‚ NC‚ Augusta‚ GA‚ and Indianapolis‚ IN? What benefits and risks? The Reasons for acquiring the 12 urban stations from Clear Channel could be the following: - Bigger African American Base: It would draw more African-American listeners than any other radio broadcaster and cover more African-American households than any
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RISK-ADJUSTED DISCOUNT RATES and LIABILITY BETA RUSSELL E. BINGHAM T H E H A R T F O R D FINANCIAL SERVICES G R O U P Table of Contents Page 2 3 5 7 8 11 12 13 14 14 15 16 17 17 18 Subject Abstract 1. Summary 2. Total Return Model 3. After-Tax Discounting 4. Derivation of Risk-Adjusted Discount Rate and Liability Beta Figure l : Baseline Risk / Return Line vs Leverage 5. Liability Beta Figure 2: Equity vs Liability Beta Figure 3: Equity Beta vs Risk-Adjusted Discount Rate (After-Tax)
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management Radio One Case This case involves whether Radio One should purchase the 21 radio stations from Clear Channel‚ Davis and IBL LLC and the impact of the acquisition to the investors and on the market. Examining the stations it fits with Radio One’s Corporate Strategy and they have the ability to bid first on a group of stations that would double Radio One’s size. Also this purchase would create national coverage for Radio One. First we must look at the Return on Asset of Radio One. With
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Radio One‚ Incorporated In general Assume a corporate tax rate of 34%‚ and a market risk premium of 7.2%. Data in exhibit 9 are in $1‚000. Show and explain all your calculations‚ i.e. the reader/grader must be able to follow your reasoning and be able to understand all your calculations without using time to reconstruct your numbers. Make additional assumptions if necessary‚ but make them explicitly. Good luck. Questions 1. Why does Radio One want to acquire the 12 urban stations
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Radio One Radio One Inc. was founded by Catherine Hughes in 1980. Radio One was the largest radio group targeted to African Americans. They had remarkable success by purchasing underperforming stations and went from only 7 stations in 95 to 28 in 99. In 1980‚ Hughes and her husband raised enough money to purchase WOL-AM in Washington‚ D.C. for just under one million dollars. This increased their credibility. Radio One’s strategy was to provide urban-oriented entertainment‚ with information easily
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Radio One Inc. is a company that was founded in 1980 by Catherine Hughes who had learned the radio business while teaching at Howard University. Catherine and her husband purchased WOL-AM in Washington‚ D.C. for just under one million dollars. Hughes changed the format from R&B music and public affairs to talk radio. To cut back on expenses the Hughes became radio personalities. Expansion for Radio One began in 1987 when the Hughes’ purchased WMMJ-FM in Washington for about $7.5 million and
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