Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

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 fine 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.:- M945604

Have any Question? 


Related Questions in Basic Finance

What distinguishes the free cash flow of a firm from its

What distinguishes the free cash flow of a firm from its cash flow from operations? What is the relation between EBITDA and cash flow from operations? How can a negative free cash flow be considered good news? How can a ...

Each of the following research designs has a potential

Each of the following research designs has a potential threat to the internal validity of the research. For each, indicate what the confounding variable is and how it might have been eliminated. a. The Pepsi-Cola Company ...

1 why should investors be concerned about market rents if

1. Why should investors be concerned about market rents if they are purchasing a property subject to leases? 2. What is meant by equity? 3. What are the similarities and differences between an overall rate and an equity ...

You have recently been hired by swan motors inc smi in its

You have recently been hired by Swan Motors, Inc. (SMI), in its relatively new treasury management department. SMI was founded 8 years ago by Joe Swan. Joe found a method to manufacture a cheaper battery with much greate ...

1 the common stock of buildwell construction has a beta of

1) The common stock of Buildwell Construction has a beta of 0.90. The T-bill rate is 4% and the market risk premium is estimated at 8%. Buildwell's capital structure is 30% debt, paying a 5% interest rate and 70% equity. ...

Objective use a trial balancerefer to mcallen incs trial

Objective : Use a trial balance. Refer to McAllen, Inc.'s trial balance in Short Exercise. The purpose of this exercise is to help you learn how to correct three common accounting errors. Error 1. Slide. Suppose the tria ...

An article observes the federal reserve announced that it

An article observes: "The Federal Reserve announced that it would open currency swap lines-in essence, printing dollars and exchanging them for euros. . . ." Why would the Fed and the European Central Bank enter into suc ...

1 what is the difference between the short position and the

1. What is the difference between the short position and the long position in a futures market? 2. Give an example of how someone might hedge using a commodity futures and give an example of how someone might hedge using ...

1 what are forward rates of interest how are they

1. What are forward rates of interest? How are they determined? What do they have to do with indexes used to adjust ARM payments? 2. Distinguish between the initial rate of interest and expected yield on an ARM. What is ...

Option valuation projectquestion 1 calculate the normal

Option Valuation Project Question 1: Calculate the normal distribution and cumulative distribution for "d" ranging from -5 to +5 in increments of 0.2. Assume the distribution is standard normal (mean = 0, variance =1). U ...

  • 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