Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Enterprise Evaluation. In the summer of 2010, Smidgeon Industries was evaluating whether or not to purchase one of its suppliers. The supplier, Carswell Manufacturing, provides Smidgeon with the raw steel Smidgeon uses to fabricate utility trailers. One of the first things that Smidgeon's management did was to forecast the cash flows of Carswell for the next five years:

Year cash flows

1 1,200,000

2 1,260,000

3 1,323,000

4 1,389,150

5 1,258,608

Next, Smidgeon's management team looked at a group of similar firms and estimated Carswell's cost of capital to be 15%. Finally, they estimated that Carswell would be worth approximately six times its Year 5 cash flow in five years.

a. What is your estimate of the enterprise value of Carswell?

b. What is the value of the equity of Carswell if the acquisition goes through and Smidgeon borrows $2.4 million and finances the remainder using equity?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M943442

Have any Question? 


Related Questions in Basic Finance

Budget assignmentrefer to the city of granston case 11-3 at

Budget Assignment Refer to the City of Granston Case 11-3 at the end of Chapter 11. Using the ‘Current Year Q-3' data found in Exhibit 2 and Exhibit 3, create a project supply and materials budget based on the informatio ...

Explain why a call option with zero exercise price is

Explain why a call option with zero exercise price is equivalent to the underlying stock, assuming no dividends on the stock during the life of the option? Why might two calls or puts alike in all respects but time to ex ...

Surmec inc has sales of 21 million last year the companys

Surmec, Inc. has sales of $2.1 million last year. The company's primary business line is manufacturing of nuts and bolts. Since this is a mature industry, the analysts are certain that the sales will grow at a steady rat ...

According to anbspsurvey 57of the residents of a city

According to a survey, 57%of the residents of a city oppose a downtown casino. Of these 57%about 8 out of 10 strongly oppose the casino. Complete parts(a) through(c). (a) Find the probability that a randomly selected res ...

1 why can the current movement toward establishing supply

1. Why can the current movement toward establishing supply chains be characterized as a revolution? 2. Compare the concept of a modern supply chain with more traditional distribution channels. Be specific regarding simil ...

Suppose you expected the return on the market to be 10 and

Suppose you expected the return on the market to be 10% and the return on the risk-free asset to be 2%. If you are considering a stock with a beta of 1.2, what is the expected return on this stock according to the securi ...

Assignmentbackgroundfinancial literacy helps you to become

Assignment Background: Financial literacy helps you to become a better manager. Understanding the financial side of the business will make you more effective on the job and will make your work life more meaningful. The t ...

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 ...

Uncertain scenario - maximizing the meanthe potential

Uncertain Scenario - Maximizing the Mean The potential revenues of all projects are in fact uncertain. The company determines that the revenue for project 1 is following a uniform distribution ranging from $1,200,000 to ...

Discussion please use references bullwhat effect do

Discussion ** please use references ** • What effect do interest rates have on the calculation of future and present value? ( 125- words ) • How does the length of time affect future and present value? How do these two f ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro