Question
Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that
Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that supplies word processing operators and computer programmers to business with temporary heavy workloads. Your employer is also considering the purchase of a Biggerstaff and Biggerstaff (B&B), a privately held company owned by two brothers, each with 5 million shares of stock. B&B currently has free cash flow of $24 million, which is expected to grow at a constant rate of 5%. B&B's financial statements report marketable securities of $100 million, debt of $200 million, and preferred stock of $50 million. B&B's WACC is 11%. Answer the following questions. j. Use a pie chart to illustrate the sources that comprise a hypothetical companys total value. Using another pie chart, show the claims on companys value. How is equity a residual claim?
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