Trident University Module 5- SLP FIN501 Dr. Glenn Tenney Net present Value‚ Mergers and acquisitions When brainstorming on the possible ideas of mergers or acquisitions it was easy at first to automatically think similar corporations within the same market either small or big or even in direct competition. Upon researching and reviewing the required readings I realized there are numerous types of mergers and acquisitions that could and should be considered in the terms of better business
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000) 1 18‚000 19‚000 2 15‚000 17‚000 3 18‚000 19‚000 4 16‚000 14‚000 5 19‚000 15‚000 6 14‚000 13‚000 Evaluate the above proposals according to: 1. Pay Back Period. 2. Accounting Rate of Return (ARR) 3. Net present value method (NPV) Proposal A is better than B‚ because ARR and NPV are higher than Proposal B 2. There are two Proposals. Proposal A and Proposal B. Proposal A costs $ 80‚000 and Proposal B costs $ 100‚000. The discount
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As with any other merger analysis‚ we need to examine the present value of the incremental cashflows. The cash flow today from the acquisition is the acquisition costs plus the dividends paidtoday‚ or:Acquisition of Hybrid–$550‚000‚000Dividends from Hybrid$150‚000‚000Total–$400‚000‚000Using the information provided‚ we can determine the cash flows to Birdie Golf from acquiringHybrid Golf. All earnings not retained are paid as dividends‚ so the cash flows for the next five yearswill be: Year 1Year
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Question 1 2 out of 2 points | | | Assume that the economy is in a mild recession‚ and as a result interest rates and money costs generally are relatively low. The WACC for two mutually exclusive projects that are being considered is 8%. Project S has an IRR of 20% while Project L ’s IRR is 15%. The projects have the same NPV at the 8% current WACC. However‚ you believe that the economy is about to recover‚ and money costs and thus your WACC will also increase. You also think that the projects
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INDIVIDUAL QUESTIONS Case Questions: 1. What are the yearly cash flows that are relevant for this investment decision? Do not forget the effect of taxes and the initial investment amount. (Submit an excel spreadsheet into D2L containing your computations.) Worldwide Paper Company (WPC) has an opportunity to take on a new project. With this project they would be considering an addition of a new on-site Longwood wood yard. The yearly cash flows for this investment seem to be very good if everything remained
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What is values clarification? Howard Kirschenbaum (Co-Director of Sagamore Institute and Executive Director of the National Coalition for Democracy in Education‚ Sarasota Springs New‚ York) says: I think the basic thing that values clarification does — which is to identify an important issue that has value dimensions and to provide an effective way for young people to identify their own beliefs and feelings on this issue and to share these and to interact with others — is something that is a part
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5 5 5 1 5 (p5) (p2) (p83) (p82) (p85) (p82) (p84) (p11) (p55) (p60) (p8) Question 16 Answer = 3 Net profit is the difference between the total costs and the total income over the life of the project. ((-155 000) + (-5 000) + 40 000 + 50 000 + 50 000 + 50 000 + 30 000) = R60 000 Question 17 Answer = 4 Net profit is the difference between the total costs and the total income over the life of the project. ((-140 000) + 15 000 + 5 000 + 20 000 + 30 000 + 60 000 + 70 000) =
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CASE 1: Warren Buffett: a) From Warren Buffett’s perspective‚ what is the intrinsic value? According to Warren Buffett’s perspective‚ the intrinsic value is defined as “the present value of future expected performance” (Bruner‚ Eades‚&Schill‚ 6th 2010). Why is it accorded such importance? It can be used to estimate the value of the business’ ongoing operations‚ not company’s stock. How is it estimated? The intrinsic value is very subjective‚ but he stated that “it is better to be approximately
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1. Given the proposed financing plan‚ describe your approach (qualitatively) to value AirThread. Should Ms. Zhang use WACC‚ APV or some combination thereof? Explain. (2 points) * From the statement of AirThread case‚ we know that American Cable Communication want to raise capital by Leveraged Buyout (LBO) approach. This means ACC will finance money though equity and debt to buy AirThread and pay the debt by the cash flows or assets of AirThread. * In another word‚ it’s a highly levered transaction
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CHAPTER 5 Net Present Value and Other Investment Criteria Answers to Problem Sets 1. a. A = 3 years‚ B = 2 years‚ C = 3 years b. B c. A‚ B‚ and C d. B and C (NPVB = $3‚378; NPVC = $2‚405) e. True f. It will accept no negative-NPV projects but will turn down some with positive NPVs. A project can have positive NPV if all future cash flows are considered but still do not meet the stated cutoff period. 2. Given the cash flows C0‚ C1‚ . . . ‚ CT
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