Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

4. What is the amount of the increase in net working capital (in 000 's) for Ideko in 2008 assuming Ideko holds $6.5 million of

image text in transcribed

4. What is the amount of the increase in net working capital (in 000 's) for Ideko in 2008 assuming Ideko holds $6.5 million of cash in excess of its working capital needs ? 5. If Ideko decides to test if A/R-Days of 45 days can be used, what is the amount of the increase in net working capital (in 000's) for Ideko in 2008 assuming Ideko holds $6.5 million of cash in excess of its working capital needs ? Assume all else are remaining same. 6. Assuming that Ideko has an EBITDA multiple of 9.4, then what is the continuation levered P/E ratio of Ideko in 2010 ? 7. Suppose that Rose Industries is considering the acquisition of another firm in its industry for $100 million. The acquisition is expected to increase Rose's free cash flow by $5 million the first year, and this contribution is expected to grow at a rate of 3% every year thereafter. Rose currently maintains a debt to equity ratio of 1, its corporate tax rate is 21%, its cost of debt rD is 6%, and its cost of equity rE is 10%. Rose Industries will maintain a constant debt-equity ratio for the acquisition. Given that Rose issues new debt of $50 million initially to fund the acquisition, then what is the present value of the interest tax shield for this acquisition? 4. What is the amount of the increase in net working capital (in 000 's) for Ideko in 2008 assuming Ideko holds $6.5 million of cash in excess of its working capital needs ? 5. If Ideko decides to test if A/R-Days of 45 days can be used, what is the amount of the increase in net working capital (in 000's) for Ideko in 2008 assuming Ideko holds $6.5 million of cash in excess of its working capital needs ? Assume all else are remaining same. 6. Assuming that Ideko has an EBITDA multiple of 9.4, then what is the continuation levered P/E ratio of Ideko in 2010 ? 7. Suppose that Rose Industries is considering the acquisition of another firm in its industry for $100 million. The acquisition is expected to increase Rose's free cash flow by $5 million the first year, and this contribution is expected to grow at a rate of 3% every year thereafter. Rose currently maintains a debt to equity ratio of 1, its corporate tax rate is 21%, its cost of debt rD is 6%, and its cost of equity rE is 10%. Rose Industries will maintain a constant debt-equity ratio for the acquisition. Given that Rose issues new debt of $50 million initially to fund the acquisition, then what is the present value of the interest tax shield for this acquisition

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Options Futures And Other Derivatives

Authors: John Hull

11th Global Edition

1292410655, 9781292410654

More Books

Students also viewed these Finance questions

Question

Who should apply a scorecard approach?

Answered: 1 week ago

Question

Did you open with an issue explanation?

Answered: 1 week ago