Question
Which company sold for the highest cash equivalent value? Term is introduced on page 2 of the text. It means compute the present value of
Which company sold for the highest cash equivalent value? Term is introduced on page 2 of the text. It means compute the present value of the payments to be received. (Think. Does a seller receive more economic value today by receiving $1,000 today or $1,000 in 5 years?)
| a. | Company A was purchased for $1,000,000 for cash today.
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| b. | The owner of Company C just sold the business. The former owner received a non-interest-bearing note for 20 equal semi-annual payments of $80,000. The market rate of interest is 8.4% (APR) for this type of transaction | |
| c. | The owner of Company B just sold the business. The former owner received a non-interest-bearing note for 15 equal annual payments of $100,000. The market rate of interest is 8.4% for this type of transaction. | |
| d. | The owner of Company D just sold the business. The former owner received a non-interest-bearing note for $1,000,000 due in exactly 1 year. The market rate of interest is 8.4% (APR) for this type of transaction. |
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Handbook Of The Economics Of Finance
Authors: George M. Constantinides, Milton Harris, Rene M. Stulz
1st Edition
044459406X, 978-0444594068
