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Please I need the answers for the following questions with clear explanation of the calculation. Thank you in advance. Given the following case, answer questions
Please I need the answers for the following questions with clear explanation of the calculation.
Thank you in advance.
Given the following case, answer questions 9 to 13 below: Car & Co. is a German automobile corporation specialized in producing sports cars. In 2016, it has acquired Tiry Co., an English tire company. The acquisition costed $842 million and it was made for cash. It has resulted in $450 million cost reduction per year. Assume that the values of both Car & Co. and Tiry Co. before acquisition were $19.5 billion and $6.8 billion respectively and that the opportunity cost of capital is 12%. 9. What is the type of this combination? * Horizontal Vertical Conglomerate O Cross-boarder merger None of the above 10. What is the gain from this acquisition? * $5.458 billion O $25.458 billion $3.750 billion $10.857 billion None of the above Given the following case, answer questions 9 to 13 below: Car & Co. is a German automobile corporation specialized in producing sports cars. In 2016, it has acquired Tiry Co., an English tire company. The acquisition costed $842 million and it was made for cash. It has resulted in $450 million cost reduction per year. Assume that the values of both Car & Co. and Tiry Co. before acquisition were $19.5 billion and $6.8 billion respectively and that the opportunity cost of capital is 12%. 9. What is the type of this combination? * Horizontal Vertical Conglomerate O Cross-boarder merger None of the above 10. What is the gain from this acquisition? * $5.458 billion O $25.458 billion $3.750 billion $10.857 billion None of the above 11. How much cash money was paid by Car & Co. to Tiry Co.?* O $7.642 billion $5.958 billion $6.280 billion $8.560 billion None of the above 12. If Car & Co. had paid $100 in cash for every share of Tiry Co., how many shares had Tiry Co., before the acquisition? * 0 61.250 million shares 76.420 million shares 59.580 million shares 49.870 million shares O None of the above 13. What is the Net Present Value (NPV) of this acquisition? * $0.778 billion $17.816 billion $2.462 billion $2.908 billion None of the above Given the following case, answer questions 14 to 16 below: Morina Resto. is family owned restaurant chain established 10 years ago in Rome, Italy. It currently has 5 million shares outstanding. Although Morina Resto. has done well, the firm's founder believes that an industry shakeout is imminent. To survive, Morina Resto. must grab market share now, and this will require a large infusion of new capital. Mr. Georges Morina, the Chief Executive Officer (CEO), expects earnings to continue rising sharply and looks for the stock price to follow suit, thus, he does not think it would be wise to issue new common stock at this time. On the other hand, interest rates are currently high by historical standards, the interest payments on a new debt issue would be prohibitive. Therefore, he has chosen to finance the needed capital using bonds with warrants. Mr. Morina estimates that Morina Resto. could issue 100,000 bonds-with-warrants packages consisting of a 20-year bond and 30 warrants. Each warrant would have a strike price of $29 and 15 years until expiration. It is estimated that each warrant, when detached and traded separately, would have a value of $5. The coupon on a similar bond but without warrants would be 10%. 14. What coupon rate should be set on the bond with warrants if the total package is to sell for $1,000?* 7.52% 8.23% 8.03% 9.52% O None of the above 15. How much cash will Morina Resto.receive when the warrants are exercised? * $50.23 million $65.32 million $29.00 million $87.00 million O None of the above 16. How many shares of stock will be outstanding after the warrants are exercised? * O 3 million shares 3.5 million shares 5.8 million shares 8 million shares None of the above Given the following case, answer questions 17 to 19 below: Silver Inc. has just launched its initial public offering IPO with the help of BL Invest, a well-known investment bank. During the IPO, the firm issued 10 million new shares. The initial price was $25 per share, with BL Invest retaining $3.2 fees. The first day closing price was $29. 17. What were the gross proceeds from this offering?* $250 million $290 million $145 million $160 million O None of the above 18. What offering percentage did BL Invest receive? * 22.07% 11.03% 12.80% 11.03% None of the above 19. What is the indirect cost of going public for Silver Inc.?* $8 million $72 million $32 million $40 million O None of the above 20. In its negotiations with its investment bankers, Gold Co. has reached an agreement whereby the investment bankers receive a smaller fee now (8% of gross proceeds versus their normal 10%) but also receive a 3-years option to purchase an additional 150,000 shares at $10.00 per share. Gold Co. will go public by selling $10,000,000 of new common stock. The investment bankers expect to exercise the option and purchase the 150,000 shares in exactly three years, when the stock price is forecasted to be $13.50 per share. However, there is a chance that the stock price will actually be $20.00 per share three years from now. If the $20 price occurs, what would the present value of the entire underwriting compensation be? Assume that the investment bankers' required return on such arrangements is 14%, and ignore taxes.* $1,812,457 O $2,223,357 $2,824,915 $3,024,915 None of the above Given the following case, answer questions 21 to 25 below: Wandou Inc. is a leading Chinese manufacturing company that provides a wide range of home, office and garden furniture. It wants to expand its business internationally. The proposed expansion would require the firm to raise about $15 million in new capital. Because Wandou currently has a debt ratio of 45% and because current shareholders already have all their personal wealth invested in the company, they would like to sell common stock to the public to raise the $15 million. However, the current shareholders want to retain voting control. The estimated pre-IPO value of equity of the company is about $65 million and there are 6.5 million of existing shares of stock held by current shareholders. The investment bank will charge a 7% spread. 21. To net $15 million, what is the total value of stocks that must be sold (approximately)? * $13.950 million $6.750 million $15.850 million $16.129 million None of the above 22. What percentage of shares will the new investors require? * 20.16% 18.87% 17.89% 16.98% None of the above 23. How many shares will the new investors require (approximately)?* 1,641,414 shares 1,416,276 shares 1,850,450 shares 1,960,753 shares None of the above 24. What is the estimated offer price per share? * $8.50 $9.75 $4.77 $9.01 None of the above 25. What is the total post-IPO value of equity?* $80 million $78.95 million $86.23 million $75 million None of the aboveStep by Step Solution
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