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Answer to 4 decimal points Valuing an Entity with Buy-Manage-Sell Model -- Value to all Stakeholders Introduction Just Q Tips (JQT) is a profitable, debt
Answer to 4 decimal points
Valuing an Entity with Buy-Manage-Sell Model -- Value to all Stakeholders Introduction Just Q Tips (JQT) is a profitable, debt free entity, operating in steady-state forever. Despite this, the economy is in recession, which has depressed the price of JQT's stock. Your Equity/Debt investor team is considering buying it and restructuring its debt. The asking price for 100% of the firm's stock is: Your team believes that an optimal capital structure for the firm would be: If your team proceeds with the Just Q Tips transaction: - The equity investors will pay (1D)/(D+E)% of the purchase price from their own funds. - Just Q Tips will take out a long-term loan at the moment of close, provided by the debt investors on the team, to pay the current owners the rest of the purchase price. - The equity investors will operate Just Q Tips in its recapitalized steady-state for three years. - At the end of this time: 100% of the stock will be resold for an estimated $72.0000MM and the loan will be terminated. (Principal will be repaid). Financing Structure Existing As purchased Key Rates Existing35.000%7.000%4.800%4.800%Aspurchased35.000%10.000%7.530%6.80900% Free Cash Flows What is quantity a? Question 2 What is quantity b ? Question 3 What is the absolute value of quantity c? Question 4 What is quantity d
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