Suppose based on date the needed return is 13.29. determine, Ask an Expert

Finance

1) Susie corporation is considering acquisition of Rolly Inc. Rolly Inc has the capital structure consisting of 23million (market value) of 11% bonds and= $47 million (market value) of common stock. Rolly Inc's pre-merger beta is 1.36. Susie corporation’s beta is= 1.02, and both it and Rolly Inc face a 40% tax rate. Nancy's capital structure is 40% debt and 60% equity. The free cash flows from Rolly Inc are evaluated to be 6 million for each of next 4 years and the horizon value of= $20 million in year 4. Tax savings are evaluated to be= $1.5 million for each of next 4 years and the horizon value of= $10 million in year. New Debt would be issued in finance gaining and retire old debt, and this new debt would have the interest rate of 8%. Presently, risk free rate is 6.0% and market risk premium is 4.0%. Suppose, based on date the needed return is 13.29%. Determine the value of Rolly's equity to Susie corporation?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M914415

Have any Question?

Related Questions in Basic Finance

All of us have a tendency to categorize people into

All of us have a tendency to categorize people into stereotypic groups. If you look around at the students on campus, you will see science geeks, artsy freaks, jocks, wallflowers, cheerleaders, and party animals, just to ...

An electronic retail chain wishes to minimize its ordering

An electronic retail chain wishes to minimize its ordering costs for a particularly popular model of laptop computer. This retail has a line credit to finance its inventory and the current holding rate is 5.5%. The chain ...

1 what is a restricted range and what effect does it have

1. What is a restricted range, and what effect does it have on correlation coefficients? How would you detect and correct a restricted range? 2. How do we know whether a particular score is an outlier?

Company checkpoint issued bonds at a discount where each

Company Checkpoint issued bonds at a discount where each $1,000 face(par) bond was issued for $900. The coupon rate is stated as 3.75%. Company Delta issued its bonds at par (each $1,000 of bond was issued for $1,000) wi ...

1 what do we mean by overage in a retail lease agreement

1. What do we mean by overage in a retail lease agreement? How might it be calculated? 2. What is sensitivity analysis? How might it be used in real estate development? 3. Why is the practice of "holdbacks" used? Who is ...

A project is expected to create operating cash flows of

A project is expected to create operating cash flows of $29,000 a year for three years. The initial cost of the fixed assets is $60,000. These assets will be worthless at the end of the project. An additional $4,000 of n ...

1 the study of annual reports reviewed in this chapter

1. The study of annual reports reviewed in this chapter showed that earnings per share was disclosed in every annual report. Why? 2. The study of annual reports reviewed in this chapter indicated that wide differences of ...

What main effects and interaction could you test with the

What main effects and interaction could you test with the design you developed for Question 3? Are you predicting that you will obtain an interaction? Question 1 Build on the design you created in Question 1 to test the ...

Toynbspcorp produces and sells pinball machines its average

Toy Corp. produces and sells pinball machines. Its average selling price is currently $5,400 per game. Based on a review of its projected financial statements, the company's variable costs are $2,800 per unit sold and to ...

1 discuss the major supply chain aps applications with

1. Discuss the major supply chain APS applications with particular focus on the role and anticipated benefits for each application. 2. Discuss overall information flow and the major role of each APS system component. 3. ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert