IDX Technologies is a privately held developer of advanced security systems based in Chicago. As part of your business development strategy, in late 2008 you init about the possibility of acquiring the business at the end of 2008. Estimate the value of IDX per share using a discounted FCF approach and the following data: • Debt: $23 million • Excess cash: $106 million • Shares outstanding: 50 million • Expected FCF in 2009: $47 million • Expected FCF in 2010: $57 million • Future FCF growth rate beyond 2010: 5% • Weighted-average cost of capital: 9.4%
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- RTE Telecom Inc., which is considering the acquisition of Lucky Coro, estimates that acquiring Lucky will result in an incremental value for the firm. The analysts involved in the deal have collected the following information from the projected financial statements of the target company: Data Collected (in millions of dollars) Year 1 Year 2 Year 3 EBIT $120 $14.4 $18.0 Interest expense 505560 Debt 29.7 35.1 37.8 Total net operating capital 109.2 111.3 1134) Lucky Corp is a pubicly traded company, and its market- determined pre-merger beta is 1.20 You also have the following information about the company and the projected statements: Lucky currently has a $12.00 million market value of equity and S 7:80 million in debt. The risk-free rate is 3.5%, there is a 5.60% market risk premium, and the Capital Asset Pricing Model produces a pre merger required rate of return on equity rs of 10.22% Lucky's cost of debt is 5.50% al a laxtale of 35% The projections assume that the company will have…Sinaloa Appliance, Incorporated, a private firm that manufactures home appliances, has hired you to estimate the company's beta. You have obtained the following equity betas for publicly traded firms that also manufacture home appliances. Firm iRobot Middleby's National Presto Newell Brands Whirlpool Asset beta Beta 0.89 1.84 0.09 1.04 1.74 L Debt $0 747 0 11,918 4,495 ($ millions) Market Value of Equity $ 2,990 7,410 794 a. Estimate an asset beta for Sinaloa Appliance. Note: Round intermediate calculations and final answer to 3 decimal places. 26,270 13,910(EBIT-EPS analysis) A group of retired college professors has decided to form a small manufacturing corporation that will produce a full line of traditional office furniture. The investors have proposed two financing plans. Plan A is an all-common-equity alternative. Under this agreement, 1 million common shares will be sold to net the firm $20 per share. Plan B involves the use of financial leverage. A debt issue with a 20-year maturity period will be privately placed. The debt issue will carry an interest rate of 10 percent, and the principal borrowed will amount to $6 million. The marginal corporate tax rate is 21 percent. a. Find the EBIT indifference level associated with the two financing proposals. b. Prepare a pro forma income statement that proves EPS will be the same regardless of the plan chosen at the EBIT level found in part a. c. Prepare an EBIT-EPS analysis chart for this situation. d. If a detailed financial analysis projects that long-term EBIT will always be close to…
- Hanley Limited manufactures products that capture solar energy. The company plans to list its shares on the Venture Exchange. To do so, it must meet all of the following initial listing requirements (among others): Net tangible assets must be at least $500,000. Pre-tax earnings must be $50,000. The company must have adequate working capital. Hanley has experienced significant growth in sales and is having difficulty estimating its bad debt expense. During the year, the sales team has been extending credit more aggressively in order to increase their commission compensation. Under the percentage-of-receivables approach using past percentages, the estimate is $50,000. Hanley has performed an aging and estimates the bad debts at $57,000. Finally, using a percentage of sales, the expense is estimated at $67,000. Before booking the allowance, net tangible assets are approximately $550,000. The controller decides to accrue $50,000, which results in pre-tax earnings of $60,000.…Teleflex plc is a large multinational company in the power industry. The company needs to raise finance for expansion and is planning to raise this finance by listing and selling shares on the Stock Exchange. The finance director has asked for your assistance in preparing certain figures and reports for consideration by the management board.The extracts from Teleflex plc’s financial statements are shown below:Profit attributable to the ordinary shareholders for the year ended 31 March 2020 = £425,000 Number of ordinary shares in issue at 1 April 2019 = 4,000,000Teleflex plc issued one new share for every four existing shares held by way of a rights issue on 1 October 2019; the value of the rights was 50p per share on 1 October 2019. The share price before the issue was £1.00 per share.Required:With reference to IAS 33, Earnings per Share (EPS):a) Calculate the basic earnings per share to be reported in the financial statements of Teleflex Plc for the year ended 31 March 2020.EPS is…Sinaloa Appliance, Incorporated, a private firm that manufactures home appliances, has hired you to estimate the company's beta. You have obtained the following equity betas for publicly traded firms that also manufacture home appliances. Pirm Robot Middleby's National Presto Nevell Brands Whirlpool Beta 0.94 1.89 Asset beta 0.14 1.09 1.79 Debt (5 millions) 50 762 D 11,943 4,520 Market Value of Equity 3,240 7,510 849 26,770 14,260 a. Estimate an asset beta for Sinaloa Appliance. Note: Round intermediate calculations and final answer to 3 decimal places.
- Sinaloa Appliance, Inc., a private firm that manufactures home appliances, has hired you to estimate the company’s beta. You have obtained the following equity betas for publicly traded firms that also manufacture home appliances. ($ millions) Firm Beta Debt Market Value of Equity iRobot 0.97 $0 $ 3,390 Middleby's 1.92 771 7,570 National Presto 0.17 0 882 Newell Brands 1.12 11,958 27,070 Whirlpool 1.82 4,535 14,470 a. Estimate an asset beta for Sinaloa Appliance. (Round intermediate calculations and final answer to 3 decimal places.)Triano Train Transports shows the following on their most recent balance sheet: Current Assets: 1871Total Liabilities: 1994Inventory: 458Net working Capital: 1111Total Assets: 3007Total Equity: 1636Total Debt: 2602Earnings per Share: 3.22Market Value: 60.03 You want to identify if the company is highly leveraged and therefore a higher risk for you as an investor. Specifically, you want to find out how much debt the company has in comparison to each dollar of equity. Determine which ratio to use, calculate it and put the number in the answer.7. Your company is currently contemplating whether to buy Hot House, a national chain of computer systems consultants based in California. Your job is to estimate the market value of the equity in Hot House. To accomplish this task, you have gathered the following information. The estimated FCFF generated by Hot House for each of the next five years are as follows. CFF 1 $2,400 2 3 4 5 $2,910 $3,452 $4,452 $5,352 Subsequent to year 5, you estimate that the cash flows will grow at 6% indefinitely. Currently, the company has $5 million of debt outstanding, but that debt balance is expected to increase by 5% at the end of each year. Thus, the current debt balance of $5 million will increase to $5.25 million at the end of year 1, $5.5125 million at the end of year 2, etc. Fortunately, the before-tax cost of debt is expected to remain stable at 12%. Finally, you estimate that the required return on the unlevered equity is 16%. If the company has 1 million shares outstanding, what is the…