a. What is the synergy from the merger? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What is the value of Flash-in-the-Pan to Fly-By-Night? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) c. What is the cost to Fly-By-Night of each alternative? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) d. What is the NPV to Fly-By-Night of each alternative? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) e. What alternative should Fly-By-Night use?
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- FrontLier Company is planning to acquire Stint Corp. The additional pre-tax income from the acquisition will be $150,000 in the first year, but it will increase by 5% in future years. Because of diversification, the beta of FronLier will decrease from 1.20 to 0.9. Currently the return on the market is 11% and the riskless rate is 6%. What is the maximum price that FrontLier should pay for Stint Corp? The tax rate of FrontLier is 30%. O 1,870,000 1,872,500 1,875,000 O 1,909,091Green Mfg is about to launch a new product. Depending on the success of the new product, they will have one of four values next year: $150 million, $140 million, $95 million, and $82 million. These outcomes are all equally likely, and this risk is diversifiable. Suppose the risk-free interest rate is 5% and that, in the event of default, 30% of the value of their assets will be lost to bankruptcy costs. (Ignore all other market imperfections, such as taxes.) a. What is the initial value of Green's equity without leverage? Now suppose Green has zero-coupon debt with a $100 million face value due next year. b. What is the initial value of Green's equity? What is Green's total value with leverage?Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may have one of four values next year: $151 million, $134 million, $91 million, and $84 million. These outcomes are all equally likely, and this risk is diversifiable. Suppose the risk-free interest rate is 5% and that, in the event of default, 20% of the value of Gladstone's assets will be lost to bankruptcy costs. (Ignore all other market imperfections, such as taxes.) a. What is the initial value of Gladstone's equity without leverage? Now suppose Gladstone has zero-coupon debt with a $100 million face value due next year. b. What is the initial value of Gladstone's debt? c. What is the yield-to-maturity of the debt? What is its expected return? d. What is the initial value of Gladstone's equity? What is Gladstone's total value with leverage? Suppose Gladstone has 10 million shares outstanding and no debt at the start of the year. e. If Gladstone does not issue debt, what…
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- Lipsion Ltd company is thinking about investing in one of two potential new productsfor sale. The projections are as follows: year revenue/ product s revenue/ product v0 (150,000) outlay (150000) outlay1 14000 150002 24000 253333 44000 520004 84000 63333 Calculate NPV of both products (to 1 d.p.) assuming a discount rate of 7%. Then decide which product should be selected and why ?The following table shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent perpetual growth rate. Year 1 2 3 4 5 Free cash flow −860 −430 0 236 772 Estimate the target’s maximum acquisition price. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Estimate the target’s maximum acquisition price when the discount rate is 7 percent and the perpetual growth rate is 5 percent. Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.The following table shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent perpetual growth rate. Year 1 2 3 4 5 Free cash flow −830 −415 0 218 736 a. Estimate the target’s maximum acquisition price. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) b. Estimate the target’s maximum acquisition price when the discount rate is 7 percent and the perpetual growth rate is 5 percent. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)