21. APV and debt capacity (S18-4) Suppose KCS Corp. buys out Patagonia Trucking, a privately owned business,
Question:
21. APV and debt capacity (S18-4) Suppose KCS Corp. buys out Patagonia Trucking, a privately owned business, for $50 million. KCS has only $5 million cash in hand, so it arranges a $45 million bank loan. A normal debt-to-value ratio for a trucking company would be 50%
at most, but the bank is satisfied with KCS’s credit rating.
Suppose you were valuing Patagonia by APV in the same format as Table 18.2. How much debt would you include? Explain briefly.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans
Question Posted: