Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Q1 answered, need rest with steps FUFU is looking to see whether acquiring WWW is a good idea in order to evaluate this deal. FUFU

Q1 answered, need rest with steps

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?

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?

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

The Routledge International Handbook Of Financialization

Authors: Philip Mader, Daniel Mertens, Natascha Van Der Zwan

1st Edition

1138308218, 978-1138308213

More Books

Students also viewed these Finance questions

Question

What is Accounting?

Answered: 1 week ago

Question

Define organisation chart

Answered: 1 week ago

Question

What are the advantages of planning ?

Answered: 1 week ago

Question

Describe the new structures for the HRM function. page 676

Answered: 1 week ago