Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

FUFU is looking to see whether acquiring WWW is a good idea in order to evaluate this deal. FUFU is looking at the following information.

FUFU is looking to see whether acquiring WWW is a good idea in order to evaluate this deal. FUFU is looking at the following information.
Anticipated FCFSs for WWW are:
CF1: 1000
CF2: 2000
CF3: 3000
Bond for FUFU:
Price: 850
Yearly coupon: 8.00%
Maturity: 10 years
Face value: 1000
Bond for WWW:
Price: 1100
Yearly coupon: 5.00%
Maturity: 10 years
Face value: 1000
Beta for FUFU: 1.2
Beta for WWW: 2
Market return: 15%
Risk free rate: 4%
Growth rate for WWW: 3%
D/E ratio for FUFU: 1/3
D/E ratio for WWW: 1/4
Tax rate for FUFU: 20%
Tax rate for WWW: 30%
What is the proximate cost of debt for Fufu before taxes?
A.10.49
B.9.27
C.12.09
D.8.05
Continuing with the previous question, what is the cost of debt for WWW?
A.4.58
B.3.78
C.5.07
D.6.82
Continuing with the previous question, what is the cost of equity for WWW?
A.18.3
B.26
C.22.4
D.22
Continue with the previous question what is the approximate WACC for fufu?
A.14.99
B.21.25
C.16.86
D.19.07
Continuing with the previous question what is the approximate WACC for WWW?
A.23.05
B.19.66
C.18.26
D.21.33
Continuing with the previous question what is a Terminal value for year three for WWW?
A.16,858
B.12,334
C.11,269
D.10,052
What should the approximate price for WWW?
A.10,526
B.13,301
C.15,833
D.9573
If Fufu acquires WWW, What would be the approximate NPV of this investment?
A. positive 1,329
B. negative 1,514
C. negative 533
D. positive 2,138

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

Gapenskis Cases In Healthcare Finance

Authors: George H. Pink

6th Edition

1567939651, 978-1567939651

More Books

Students also viewed these Finance questions

Question

What is solidification shrinkage?

Answered: 1 week ago