Ch5

8) What would BV's 1988 earnings per share be after all of the above adjustments?

For calculations of the acquisition price, the P/E is taken to be 8.6. The acquisition price is calculated by multiplying this value with the historical average of net income. Thus, the acquisition price comes out to be $186,215,800, which is $189,186,673 less than the enterprise value.

E. Cindy and Rob estimate that the market value of the common equity in the venture is $900,000 at the end of 2010. The market values of interest-bearing debt are judged to be the same as the recorded book values at the end of 2010. Estimate the market value-based weighted average cost of capital for Castillo Products.

1. Do you think the characteristics of feudalism help explain the later success of Western & Japanese societies?

The Dietary Supplement Health and Education Act (DSHEA) is legislation that defines and classifies nutrient supplements and certain other products as foods. Check all of the ingredients that are considered dietary supplements according to DSHEA:

On December 11, MD received an order for a total price of $22,100. Barbor Furniture Ltd. (Barbor) provided a deposit of $9,000 which was recorded as revenue when it was received on December 13. Barbor was not billed until January 2. The order was not shipped until after the year end on January 2. The remaining balance owing was recorded in accounts receivable and

d) Calculate the new value per share after the capital structure change. (Hint: use your answers to parts b and c.)

1. Assess Interco’s financial performance. Why is the company a target of a hostile takeover attempt?

31, 2004) was computed, then the total Accounts Receivable balance would be $4,578,008.14. This indicates

a) We calculated the total value of AirThread (before considering any synergies) by subtracting the value of the non-operating assets from the going concern value. This gave us a total value of $6237.85.

Analysts estimate that the $80 million in cost saving could be realized after the acquisition , however certain other costs associated with the integration approximately $130 million would occur .Hence, I take these cost savings and integration costs into consideration for the with-synergies valuation. Incorporating the effects of 80million cost savings for the merged firm (to be achieved by end of 2007 and assumed to incur in perpetuity then on) and 130 million integration costs (half of this accounted at the beginning years) in the estimated EBITs for Torrington, a new horizon value is estimated, the new FCF is discounted by acquiring company’s WACC 8.39%. Torrington company’s with- synergies valuation $1386.38 million exceeds the value as a stand-alone entity by approximately $286 million. sheet2: With-synergies Valuation of Torrington-DCF Method.

Market value proportions of: Debt = $1,147,200 / $4,897,200 = 23.4% Pref. Share = $1,250,000 / $4,897,200 = 25.5% Common equity = $2,500,000 / $4,897,200 = 51.1%

To arrive to the correct set of cash flows to use for the most basic valuation method (the WACC), Kennecott should take net income and add back tax adjusted interest expenses, depreciation and goodwill amortization, and subtract increases in net working capital and capital expenditures. Without adjusting the net income to obtain the free cash flows, the value of Carborundum to Kennecott could justified $70-$85 per share. Multiplying the per share price of $85 by the 8 million shares outstanding, Carborundum would be worth $680 million. This figures is identical to the cash flows calculated under Exhibit 7 of the case, discounted at a discount rate of 10%, which comes out to $679 million.

9.     She got the 51% of the equity where as she only had to invest 25% of the total amount being invested

20. A company has a P/E of 10, P/B of 3 and PEG ratio of 0.9. Calculate the firm’s