I have 9 questions here on investment... Please provide awnser together with calculations....

B 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 C D E F G H I Exhibit 2 J K L M SENSITIVITY ANALYSIS Equity Valuation: Equity Promote: Year of Valuation 2015 EBITDA (Operating Cash Flow) Multiple (x) Total Value Less: ST & LT Debt 2020 18,166 6.65x ---- 120,820 35,195 6.00x ---- 211,169 7,000 1,565 0 2,570 0 ---- 116,390 0 0 0 ---- 209,603 Investor 1 Investor 2 Investor 3 Investor 4 Equity ownership Before promote % Shares 10.0% 100 20.0% 200 20.0% 200 50.0% 500 --------100% Less: Accreted Balance Plus: Cash Plus: Exercise of Wrt Value of Common Equity After promote % 14.5% 19.0% 19.0% 47.5% ----- 1,000 100% Promote: Shares 153 200 200 500 ----1,053 5% to Investor 1 RETURN SCHEDULE BACKUP 1. Analysis of return to outside investors (investors other than Investor 1): Cash investment % ownership 7,500 15% 7,500 20% 7,500 25% IRR Implied market value of equity 32% 50,000.00 40% 37,500.00 46% 30,000.00 Begin 2016 (7,500.00) (7,500.00) (7,500.00) End 2016 0 0 0 End 2017 0 0 0 End 2018 0 0 0 End 2019 0 0 0 End 2020 29,868.48 39,824.64 49,780.79 83% Begin 2016 (1,500.00) End 2016 0 End 2017 0 End 2018 0 End 2019 0 End 2020 30,392.49 2. Analysis of return to Investor 1 (in promote section above): Cash investment % ownership 1,500 10.0% IRR ACQUISITION PROCESS: DUE DILIGENCE The following table represents 3 potential R&D projects. Table R&D Projects New product Market size R&D budget Profitability 1 $65,900,000 $3,100,000 34% 2 $? $5,000,000 38% 3 $37,690,000 $3,800,000 ?% 1. What market size of product 2 and profitability of product 3 will make all three products equally worthy (hint: devise a methodology to compare projects like this with multiple metrics). A. B. C. D. $95,000,000; 73% $37,000,000; 110% $63,000,500; 34% $176,300,000; 28% ACQUISITION PROCESS: BIDDING 2. In the Hilton / ITT case, Hilton was attempting to purchase ITT. Assume that Hilton has only $500,000,000 of borrowing capacity, thus ITT cash flow must finance the remainder of the cash portion of the transaction. Additionally, assume the facts in Table 1. What is highest price (combined cash and shares) Hilton can pay for ITT 1) without losing control of less than 60% of the combined company and 2) without earning less than 2.5x EBITDA/interest coverage? Table 1 EBITDA Cash Debt Deferred tax liability (payable at closing) Interest rate (on new and existing debt) Shares outstanding Current stock price A. B. C. D. $142 $60 $67 $77 ITT $1,000,000,000 $600,000,000 $3,000,000,000 $300,000,000 7.0% 120,000,000 $60.00 Hilton ----270,000,000 $34.60 PRICE PROTECTION: COLLARS 3. In a merger transaction it is agreed that the bid will be bounded by a fixed price collar as follows: $50.00 per share fixed price to target bounded 20% on both ends of current acquirer stock price. Current stock price of the acquirer is $80.00. What $ value will target receive for each target share if the acquirer price is $110.00 at closing? A. B. C. D. $110.00 $57.29 $1.92 $96.00 4. In a stock-for-stock merger transaction it is agreed that the bid will be bounded by a fixed ratio collar as follows: Ratio = 0.55 acquirer shares per target share bounded by the following collar: lower collar bound is $72.25; upper collar bound is $97.75. Current stock price of the acquirer is $80.00. What price per target share will target receive if the acquirer price is $65.00 at closing? A. B. C. D. $43.99 $72.25 $39.74 $35.75 Cable TV 5. In a cable TV system potential subscribers represents everyone in service area including both paying subscribers and households not yet customers; actual subscribers are paying subscribers. Numerator - value - is same for both ratios. For example a cable TV system is valued at $1,000,000 with 5,000 households in service area and 3,000 paying households. Market value per potential subscribers is $200 and per paying subscriber is $333. In the table below, which cable system offers more opportunity for future growth? Table Market value/potential subscriber Market value/actual subscriber A. B. C. SYSTEM A $1,200 $1,800 SYSTEM B $500 $600 SYSTEM C $200 $1,000 System A - Highest valuation System B - many actual subscribers relative to few potential subscribers. System C - few actual subscribers relative to many potential subscribers. Paired trade (industry arbitrage) 6. You believe US Air will outperform the other airline competitors. Given the prices below, the following trade reflects that view. _______________ 1,000 US Air shares; short _______________ American shares, _______________ Delta shares, _______________ Continental shares. Current stock prices US Air: $22 American: $12 Delta: $29 Continental $8 A. B. C. D. Short; ~611; ~253; ~917 Long; ~611; ~253; ~917 Long; ~917; ~611; ~253 Short; ~917; ~611; ~253 LBO MODELING Sale of a division Working capital 7. Parent Company Accounts Receivable, including the Accounts Receivable of Division X are presented in the following table. Assume that Division X is sold at the end of 2016. What is the source/use of cash from Accounts Receivable for Parent Company (excluding sale proceeds) for 2016? Table 2015 Parent Company Accounts Receivable (including Division X) Division X Accounts Receivable A. B. C. D. $1,000 2016 Pre-sale -- 2016 Post-sale $960 $190 $240 -- $40 use of cash $40 source of cash $200 source of cash $200 use of cash Additional financial model: Depreciation backup See Exhibit 2 (investment returns sheet of financial model) 8. If a) the transaction closes at March 31 (fiscal year end December 31) of the current year, b) equity investment equals $15,000,000, c) the whole company is sold on December 31 of current fiscal year + 4 (i.e. if this fiscal year is 2016 then cfy+4 is 2020) and d) investor 1 (G65-L65) receives a 10% promote, what is the IRR to Investor 1. A. B. C. D. 65.92% 92.67% 99.44% 10.00% 9. In the current version of the model, when the Division is sold later (last projected year vs. second projected year) the IRR rises for the later sale. This would be reversed - higher IRR for earlier sale if: A. The IRR will always be lower for a later sale of Division B. The IRR will always be higher for a later sale of Division C. The projected bank debt interest expense were lower in aggregate then the lost EBITDA from the sale of the Division D. The projected bank debt interest expense were higher in aggregate then the lost EBITDA from the sale of the Division