Question
NEED LAST TWO ANSWERS Please consider the following information for the next four questions. falcon Inc. is for sale, and there is a price tag
Please consider the following information for the next four questions. falcon Inc. is for sale, and there is a price tag of 1.2 million. Your company XYZ is considering a merger. Both companies have an identical cost of capital values (WACC). Both companies have a beta of 1.5. The market is expected to have a 19% return, and the risk-free rate is 3.5%. The forecasted free cash flow for the next four years for Tamu are $250,000 (FCF1), $150,000 (FCF2), $0 (FCF4) and $250,000 (FCF4). The company is expected to grow a 5% indefinitely after that. Both companies have a debt/equity ratio of 1/3, and the applicable tax rate is 35%. Both companies have a cost of debt (before taxes) at 7% what is the cost of equity for both companies? ANSW- 26.75
Continuing with the previous question, what is the WACC for both companies? ANSW-21.20
Continuing with the previous question, what is the approximate terminal value for the fourth year (TV) for falcon?
A. 1,620,370
B. 1,238,207
C. 1,543,209
D. 1,423,505
Continuing with the previous question, what is the approximate in NPV of purchasing falcon for XYZ company?
A. negative 24,819
B. positive 33,185
C. negative 12,815
D. positive 9,711
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started