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A group of investors is considering buying the Grande Corporation, but does not want to contribute to the company's financial support after the purchase. Grande's
A group of investors is considering buying the Grande Corporation, but does not want to contribute to the company's financial support after the purchase. Grande's management has offered the following financial statements covering last year (SM omitted): Grande Corporation Balance Sheets ASSETS Beginning Ending Cash 6 9 Accts receivable 13 20 Inventory 12 Z CURRENT ASSETS 31 36 Fixed Assets Gross 100 115 Accumulated depreciation (12) Net fixed assets 88 97 TOTAL ASSETS 119 133 LIABILITIES & EQUITY Accts payable 17 21 Accruals 6 8 CURRENT LIABILITIES 23 29 Debt 71 59 Equity 25 45 TOTAL LIABILITIES & 119 133 EQUITY og 96 98 1491 Grande Corporation Income Statement Sales 102 COGS 32 Depreciation Gross Margin 64 Expenses 31 EBIT 33 Interest 5 EBT 28 Tax 8 Net income 20 *Cost of Goods Sold Grande paid no dividends and sold no new stock during the year. The firm's tax rate is 40%. 1. Develop Grande's free cash flow and make a recommendation as to whether it seems to be an appropriate acquisition for the investors. Round your answer to one decimal place. Enter your answer in million of dollar 2 Free Cash flow $ millions 3. Is this an appropriate investment for investors (Yes/No)? 4. Assume that the investors will purchase the company subject to its existing debt (559M). Does that change your recommendation (Yes/No)? A group of investors is considering buying the Grande Corporation, but does not want to contribute to the company's financial support after the purchase. Grande's management has offered the following financial statements covering last year (SM omitted): Grande Corporation Balance Sheets ASSETS Beginning Ending Cash 6 9 Accts receivable 13 20 Inventory 12 Z CURRENT ASSETS 31 36 Fixed Assets Gross 100 115 Accumulated depreciation (12) Net fixed assets 88 97 TOTAL ASSETS 119 133 LIABILITIES & EQUITY Accts payable 17 21 Accruals 6 8 CURRENT LIABILITIES 23 29 Debt 71 59 Equity 25 45 TOTAL LIABILITIES & 119 133 EQUITY og 96 98 1491 Grande Corporation Income Statement Sales 102 COGS 32 Depreciation Gross Margin 64 Expenses 31 EBIT 33 Interest 5 EBT 28 Tax 8 Net income 20 *Cost of Goods Sold Grande paid no dividends and sold no new stock during the year. The firm's tax rate is 40%. 1. Develop Grande's free cash flow and make a recommendation as to whether it seems to be an appropriate acquisition for the investors. Round your answer to one decimal place. Enter your answer in million of dollar 2 Free Cash flow $ millions 3. Is this an appropriate investment for investors (Yes/No)? 4. Assume that the investors will purchase the company subject to its existing debt (559M). Does that change your recommendation (Yes/No)
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