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QUESTION 2 Awen Ltd is a manufacturer of machine tools and is at present contemplating an issue of GH¢2,000,000 10% debenture stock (2020) in order to assist the remodelling of its present production facilities. Some shareholders are reluctant to approve additional long-term debt due to the fact that the machine tools industry is subject to wide-ranging fluctuations in sales and profits. A group of shareholders have approached you and asked you to comment on the performance of Awen Ltd as compared with industrial averages and to make recommendations as to whether they should approve the proposed additional long- term debt. Abbreviated financial statements and typical ratios for firms in the machine tools industry are as follows: Awen Ltd Statement of Comprehensive Income for the year ended 31/12 2004 GH¢000 2005 GH¢000 23,500 16,000 7,500 (2,000) (3,000) Sales 20,500 14,000 6,500 (1,900) (2,600) Cost of Sales Gross profit Selling expenses Administrative expenses Operating profit…

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Question content area top Part 1 ​(Comprehensive problem)  Over the past few​ years, Microsoft founder Bill​ Gates' net worth has fluctuated between​ $20 billion and​ $130 billion. In early​ 2006, it was about​ $26 billion—after he reduced his stake in Microsoft from 21 percent to around 14 percent by moving billions into his charitable foundation. ​ Let's see what Bill Gates can do with his money in the following problems.   a.  ​Manhattan's native tribe sold Manhattan Island to Peter Minuit for ​$24 in 1626. ​ Now, 387 years later in​ 2013, Bill Gates wants to buy the island from the​ "current natives." How much would Bill have to pay for Manhattan if the​ "current natives" want a 5 percent annual return on the original ​$24 purchase​ price? b.  Bill Gates decides to pass on Manhattan and instead plans to buy the city of​ Seattle, Washington​, for ​$70 billion in 10 years. How much would Bill have to invest today at 9 percent compounded annually in order to purchase Seattle in 10…

Do solve both parts   Question 9 a) Company A has a present value of £78 million and Company B has a present value of £14 million. Merging the two would enable cost savings with a present value of £5 million. Company A acquires 100% of shares in Company B for £18 million. What do Company B’s shareholders gain from this acquisition?     b) Deepings Company has a P/E ratio of 9.6 and a share price of £1.52. What are the earnings per share of the company?

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Suppose the CEO of a $750 million all-equity firm personally owns $15 million in company stock. Assume that the risk-neutral CEO makes investment decisions based strictly on the change in value (or expected change in value for risky investments) of her personal holdings, plus private benefits (if any) she gets from the investment. a) Suppose the CEO is considering a risky investment that will generate a gain with a present value of $100 million with 50% probability, but a loss of $150 million (present value) with 50% probability. Will she invest in the risky project? b) Now, suppose that the firm recapitalizes by borrowing $700 million and pays a special dividend of $700 million, and suppose that the CEO reinvests her $14 million dividend back into the recapitalized firm. (In answering this question, ignore any change in the overall value of the firm resulting from the recapitalization.) Given the same assumptions as in (i) above, will she invest in the risky project?

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chapter 10 question 1 Assume an investor can earn 0.15 before tax and 0.12 after tax. A corporation can earn 0.14 after corporate tax. It has $100 available for investment. The tax rate on dividends and capital gains is 0.15. If the corporation retains for 15 years and then pays a dividend the investor nets $__________. If the corporation pays an immediate dividend, the investor will have (after 15 years) $_________

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Problem 4. Mr. X is an investor in ABC Corporation. In 2020, he has 1,000 shareholdings acquired at P120 per share classified as a capital asset. Mr. X uses FIFO in costing his investment holdings b. How much is the nondeductible loss in May? c. Supposing that all the remaining shares were liquidated in December 2021 at 130 per share, what would be the capital gain(loss) to be recognized.

Question 2 (5 n The target capital structure for Millennium Corporation is 50 percent common stock, 5 percent preferred stock, and 45 percent debt. Its cost of equity is 15 percent, the cost of preferred stock is 6 percent, and the cost of debt is 8 percent. The relevant tax rate is 35 percent. a) What is Millennium's WACC? - b) The company president has approached you about its capital structure. He wants to know why the company doesn't use more preferred stock financing because it costs less than debt. What would you tell the president? –

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Case 3: Mergers and Acquisitions. Alpha Inc.'s stock price is $40, and the firm has 4 million shares outstanding. You are confident that, if you take it over and replace the managers, you can improve its performance and increase its value. However, Alpha Inc. has a poison pill with a 20% trigger. As a consequence, in the event that someone buys more than 20% of the capital without management approval, it would be triggered, and all Alpha Inc.'s shareholders- other than the acquirer-would be offered to buy one new share in Alpha for each share they already own, at a 50% discount. If the price remains at $40 while you are acquiring shares in your takeover attempt, and the management of the company decides to resist your buyout attempt when you pass the 20% threshold of ownership: a. How many new shares will be issued and at what price? b. What will happen to your percentage ownership of Alpha Inc.? c. What will happen to the price of your shares of Alpha Inc.? d. Do you lose or gain from…

An investment banker agrees to underwrite an issue of 10 million shares of stock for Rochester Industries on a best-efforts basis. The investment banker is able to sell 8 million shares for $10.50 per share, and it charges Rochester Industries $0.225 per share sold. What is the profit to the investment banker if it is able to sell 8 million shares for $10.50 per share? OA) Loss of $7,500,000. OB) Profit of $1,800,000. C) Profit of $7,000,000. D) Loss of $7,000,000. E) Profit of $1,000,000.

nstructions Question 16 Which of the following statements is CORRECT? O Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset. O Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer. Corporations must use the same depreciation method for both stockholder reporting and tax purposes. O Using bonus depreciation rather than straight line depreciation normally has the effect of receiving depreciation cash flows immediately and thus increasing a project's forecasted NPV. O Using bonus depreciation rather than straight line depreciation normally has the effect of delaying the receipt of depreciation cash flows and thus reducing a project's forecasted NPV. « Previous Next Not saved Submit Quiz 80 000 000 esc DD F1 F2 F3 F4 F 5 F6 F7 FO %23 $4 % & 2 3 4 5 6 7 8 Q W А S D G K B M I

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Question 5 of 7 View Policies Current Attempt in Progress Blossom LLC, a leveraged-buyout specialist, recently bought a company and wants to determine the optimal time to sell it. The partner in charge of this investment has estimated the after-tax cash flows from a sale at different times to be as follows: $200.000 if sold one year later; $300,000 if sold two years later; $400,000 if sold three years later; and $500,000 if sold four years later. The opportunity cost of capital is 10.0 percent. Calculate the NPV of each choices. (Do not round factor values. Round answers to the nearest whole dollar, eg. 5,275.) The NPV of each choice is: NPV1 2$ NPV2 %24 NPV3 %24 NPV4 %24 When should Blossom sell the company? Blossom should sell the company i 3 years 2 years 4 years eTextbook and Media 1 year Save for Later Attempts: 0 of 3 used