-Is Sun Microsystems a good strategic fit for Oracle?
-What approaches would you use to place a value on Sun Microsystems? -Assuming a discounted cash flow valuation: -What rate of return should Oracle require on the acquisition? -What base-case cash flows do you forecast? -What is your estimate of terminal value? -What is the enterprise value of Sun Microsystems? What is the equity value? -Conduct a multiples analysis to value Sun. What economic fundamentals are reflected in the multiples? -Identify the synergies and conduct a sensitivity analysis to estimate the effect of synergies on enterprise value. -If a competing bidder appears, how high a price should Oracle be willing to offer?
Broussard Skateboard’s sales are expected to increase by 20% from $7.8 million in 2016 to $9.36 million in
Broussard Skateboard’s sales are expected to increase by 20% from $7.8 million in 2016 to $9.36 million in 2017. Its assets totaled $4 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 75%. Use the AFN equation to forecast Broussard’s additional funds needed for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.$_____
Reversing Rapids Co. purchases an asset for $180,424. This asset qualifies
Question Reversing Rapids Co. purchases an asset for $180,424. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has a tax rate of 30%. The asset is sold at the end of year 4 for $14,563.Calculate After-Tax Cash Flow at disposal. Round the answer to two decimals.
Some people have suggested combining the payback period (PBP) method
Question Some people have suggested combining the payback period (PBP) method with present value analysis to calculate a “discounted” payback period (DPBP). Instead of using cumulative inflows, cumulative present values of inflows (discounted at the cost of capital) are used to see how long it takes to “pay” for a project with discounted cash flows. For a firm not subject to a capital rationing restraint, if an independent project’s “discounted” payback period is less than some maximum acceptable “discounted” payback period, the project would be accepted; if not, it would be rejected. Assume that an independent project’s “discounted” payback period is greater than a company’s maximum acceptable “discounted” payback period but less than the project’s useful life; would rejection of this project cause you any concern? Why? Does the “discounted” payback period method overcome all the problems encountered when using the “traditional” payback period method? What advantages (if any) do you see the net present value method holding over a “discounted” payback period method?
Spring Ltd purchases an asset for R 3 000 000 and expects to use the
Question Spring Ltd purchases an asset for R 3 000 000 and expects to use the machine for 4 years. The firm will be able to deduct a SEC12C Wear and Tear allowance as follows for the next 5 years. 20% , 20% , 20% and 20% per annum. The business will be able to sell the asset at the end of 4 years for R 620 000 . At the end of the 4th year the firm will experience a ________a) recoupment of R50 000b)scrapping allowance of R20 000c) scrapping allowance of R50 000d) recoupment of R 20 000e) recoupment of R440 000
The Hagerman Heavy Metal Mining (H2M2) Corporation wants to diversify
Question The Hagerman Heavy Metal Mining (H2M2) Corporation wants to diversify its operations. Some recent financial information for the company is shown here: Stock price$75 Number of shares 40,000 Total assets$6,000,000 Total liabilities$2,000,000 Net income$500,000 H2M2 is considering an investment that has the same P/E ratio as the firm. The cost of the investment is $800,000, and it will be financed with a new equity issue. The return on the investment will equal H2M2’s current ROE. What will happen to the market-to-book ratio?What is the NPV of this investment?
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