Suppose your firm could purchase another firm for only half its replacement value.Would that be a sufficient justification for the acquisition? Explain.

Q: At times, companies try to induce voluntary conversion by offering an added incentive—maybe cash,…

A:

Q: If a company has an option to abandon a project, would this tend to makethe company more or less…

A: Introduction: Abandonment option is referred as those investment opportunities that are left to the…

Q: ND Inc. is considering Projects S and L, whose cash flows are shown below. These projects are…

A: There are various techniques that are used by the management in order to select the most beneficial…

Q: Which of the following contributes positively to the value of a real option to delay investment?…

A: Real option:A real option is a selection made open to a firm's managers on prospects for business…

Q: In the process of determining fair value, the exit price refers to:   Multiple Choice   the amount…

A: Fair value is the exit price. Fair value is the amount that is determined by market participants…

Q: What are the benefits of merging and diversifying one's assets in order to lower one's risk?

A: Diversification is a process of combining different types of assets with lower correlation in order…

Q: Which if the following statements about the use of the EBITDA multiple is true?     a. EBITDA is…

A: EBITDA multiple is a financial ratio which is used to determine the value of a company and compare…

Q: What are some factors that acquiring firms consider when they set a bid price?

A: Three main factors are whether the purchasers observe the product offers worth, how many purchasers…

Q: If two mutually exclusive projects were being compared, would a high cost of capital favorthe…

A: If two mutually exclusive projects were being compared, a higher cost of capital would favour the…

Q: What would be the impact on short-term operating income if the company were to accept the offer from…

A: Computation of impact on short - term operating income , if the company accept this offer from the…

Q: a) What is a conglomerate merger and why are they more likely to be approved? b) Limit pricing is a…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: If the annual increase in the cost to sell is higher than the required rate of return of the…

A: Required rate of return is the rate which investors would expect based on the risk level of the…

Q: WidgetBaker is considering making an acquisition of RiskyWidgets. Widgetbaker has a WACC of 12.5%,…

A: widgetbaker wacc= 12.5% riskywidget wacc= 15% widgetbaker is acquiring riskywidget

Q: Which of the statement is FALSE in financial decision making?      A. Large size of business needs a…

A: Under financial decision making, requirement of funds is an absolute necessity for any firm. Larger…

Q: Why would anyone want to purchase an F or IF derivative type of investment?

A: Floater tranche(f) It refer to that type of security whose coupon rate copy the movement of index on…

Q: The more certain a firm is about its sales, costs, and order lead time, the closer the firm can…

A: The answer is option c. relaxed current asset investment policy.

Q: Do mergers create value? If so, who profits from this value?

A: The merger means a combination of two (or) more companies to create a synergic effect. There might…

Q: Is it feasible for a new company endeavor to be lucrative while still experiencing financial…

A: Meaning of Lucrative Lucrative which simply describes as brings profitability into the business…

Q: What would be the appropriate discount rate for this calculation?

A: Discount Rate: It represents the rate of return applied in capital budgeting for the purpose of…

Q: Would a project’s NPV for a typical firm be higher or lower if the firm used acceleratedrather than…

A: Answer: A project typically has a lower NPV if the company uses accelerated depreciation rather than…

Q: a. Which of these projects would you accept? Why? b. What is the cost of the capital rationing…

A: The situation in which a firm can accept only a certain number of projects due to limitation of…

Q: A firm would accept a project with a net present value of zero because Select one: a. the return on…

A: Net Present value is used to take capital budgeting decisions i.e. whether the project should be…

Q: If a firm wishes to achieve immediate appreciation in earnings per share as a result of a merger,…

A: Appreciation- Appreciation, in universal terms, is a raise in the worth of an asset over time. The…

Q: Tesar Chemicals is considering Projects S and L, whose cash flows are shown below. These projects…

A: IRR of Project S and L are: IRR of Project S is higher than Project L.

Q: he company has an option of investing in Project A or Project B. If Project A is accepted, Project B…

A: Mutually exclusive projects are those projects, if one is selected then other cannot be selected or…

Q: Which of the following is NOT an assumption we have to make in order to use the WACC to carry out an…

A: There are some assumptions we have to make in order to use the Weighted Average Cost of capital as a…

Q: Suppose you are the CEO of a large firm in a service business and you think that by acquiring a…

A: Value chain analysis is a tool used by companies in order to identify its primary & support…

Q: Suppose your firm could purchase another firm for only half of itsreplacement value. Would that be a…

A: No, the reason given by the firm to purchase another firm is not appropriate.

Q: WSP Inc. is involved in a wide range of unrelated projects. The company will pursue any project that…

A: Risk refers to possibility of failure or chances of loss related to projects. Higher risky projects…

Q: Can the retiring strategy of a firm jeopardize its profitability? Explain and provide examples of…

A: Retirement planning doesn’t mean one must most effective give attention to their finances.…

Q: What logical arguments might you use to convince your boss to forego the project despite its high…

A: We should consider the qualitative factors of the project. It is possible that this project may…

Q: Because the cost of buying higher market share through acquisition may far exceed its revenue value,…

A: when a company buys a higher market share through acquisition there are a number of risk that a…

Q: If Genie went ahead with the acquisition of Aladdin, what is the total value of the acquisition? (…

A: Value of acquisition means the price paid by an organization to acquire a new purchaser or for the…

Q: “Merger may be profitable but are they good for the economy?” Explain your answer towards this…

A: Mergers:- A merger is a corporate combination that brings two or more companies together to…

Q: A major concern when analyzing any merger is the accuracy if the cash flows. How would the maximum…

A: The accuracy of cash flow has great importance when accounting for mergers because all the changes…

Q: What is the difference between par and book values of corporatestock? If an incorporated…

A: For funding the operations of the business or financing any project, there are various…

Q: Why might the cost of capital for a foreign project differ from that of an equivalentdomestic…

A: There are two approaches to evaluate a foreign project: the home currency approach and the foreign…

Q: U.S. GAAP requires firms to expense immediately all internal expenditures for R&D costs. Explain why…

A:

Q: Sexton Inc. is considering Projects S and L, whose cash flows are shown below. These projects are…

A: NPV It is the best alternative method used as an indicator of the dynamic calculations of an…

Q: Should Marston Manufacturing Company accept or reject the project? O Reject the project O Accept the…

A: A project should be accepted if its expected return is higher than its WACC. The appropriate WACC to…