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TransWorld Communications Inc., a large telecommunications company, is evaluating the possible acquisition of Georgia Cable Company ( GCC ) , a regional cable company. TransWorld's
TransWorld Communications Inc., a large telecommunications company, is evaluating the possible acquisition of Georgia Cable Company GCC a regional cable company. TransWorld's analysts project the postmerger data for GCC in thousands of dollars gathered in the Excel Online file below. If the acquisition is made, it will occur on January All cash flows shown in the income statements are assumed to occur at the end of the year. GCC currently has a capital structure of debt, but Trans World would increase that to if the acquisition were made. GCC if independent, would pay taxes at ; but its income would be taxed at if it were consolidated. GCCs current marketdetermined beta is and its investment bankers think that its beta will rise to if the debt ratio were increased to The cost of goods sold is expected to be of sales, but it could vary somewhat. Depreciationgenerated funds would be used to replace wornout equipment, so they would not be available to TransWorld's shareholders. The riskfree rate is and the market risk premium is The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Use only the values provided in the problem statement including the Excel Online file for your calculations. Open spreadsheet What is the appropriate discount rate for valuing the acquisition? Do not round intermediate calculations. Round your answer to two decimal places. fill in the blank What is the continuing value? Do not round intermediate calculations. Enter your answer in thousands of dollars. For example, an answer of $ thousands should be entered as not Round your answer to two decimal places. $ fill in the blank thousand What is the value of GCC to TransWorld? Do not round intermediate calculations. Enter your answer in thousands of dollars. For example, an answer of $ thousands should be entered as not Round your answer to two decimal places.
TransWorld Communications Inc., a large telecommunications company, is evaluating the possible acquisition of Georgia Cable Company GCC a regional cable company. TransWorld's analysts project the postmerger data for GCC in thousands of dollars gathered in the Excel Online file below. If the acquisition is made, it will occur on January All cash flows shown in the income statements are assumed to occur at the end of the year. GCC currently has a capital structure of debt, but Trans World would increase that to if the acquisition were made. GCC if independent, would pay taxes at ; but its income would be taxed at if it were consolidated. GCCs current marketdetermined beta is and its investment bankers think that its beta will rise to if the debt ratio were increased to The cost of goods sold is expected to be of sales, but it could vary somewhat. Depreciationgenerated funds would be used to replace wornout equipment, so they would not be available to TransWorld's shareholders. The riskfree rate is and the market risk premium is The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Use only the values provided in the problem statement including the Excel Online file for your calculations.
Open spreadsheet
What is the appropriate discount rate for valuing the acquisition? Do not round intermediate calculations. Round your answer to two decimal places.
fill in the blank
What is the continuing value? Do not round intermediate calculations. Enter your answer in thousands of dollars. For example, an answer of $ thousands should be entered as not Round your answer to two decimal places.
$ fill in the blank
thousand
What is the value of GCC to TransWorld? Do not round intermediate calculations. Enter your answer in thousands of dollars. For example, an answer of $ thousands should be entered as not Round your answer to two decimal places.
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