100% Cash: Breakeven Offer Price?* ● Assume: - Acquirer: interest rate of 6.0% and 35.8% tax rate - Target: projected EPS of $3.50 What is the breakeven offer price under 100% CASH scenario?
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- c. A non-dividend paying financial asset has a price of $200 and a oneyearfuture on this asset has price equal to $215. If the continuouslycompounded rate of interest is 3%, show that one can make an arbitrageprofit and design a strategy to earn that profit.(i) Calculate the bid-ask percentage spread on the 90-day forward £.(ii) Calculate the annualised 90-day forward discount on ask for the £.(iii) Demonstrate how to realise a profit via covered interest arbitrage if you arbitrage £ 1m.(iv) Explain why a covered interest arbitrage opportunity exists in this situation. Explain what is meant by the term ‘uncovered interest arbitrage’.6. Problem 12-12 Capital Structure Analysis Hagen Horticulture and Supplies Limited has no debt outstanding, and its financial position is given by the following data: Assets (book market) EBIT Cost of equity, r Stock price, P Shares outstanding, n, Tax rate, T The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 40% debt based on market values, its cost of equity, f,, will increase to 9.57% to reflect the increased risk. Bonds can be sold at a cost, ra, of 7%. Hagen is a no-growth. firm. Hence, all its earnings are paid out as dividends, and earnings are expected to be constant over time. a. What effect would this use of leverage have on the value of the firm? The value of the firm would I $4,000,000 $500,000 8.75% $8 500,000 30% b. What would be the market value of Hagen's equity? Market value of equity=$
- Given are three FOREX quotes as follows: $1/€ $0.5/SF SF2.5 / € What will be arbitrage profit if you start the process with €1,000?Find the Net Present Value (NPV) for Oman Computer company if the initial investment is 15000 OMR and the cash Inflows are as follows: Year 1 =2509 OMR; Year 2 =5590 OMR; Year 3=7500 OMR and Year 4=9200 OMR. Use discount rate as 2.02%. Select one: O a. None of the options O b. 8936.11 OMR O c. 8574.51 OMR O d. 8234441 OMR O e. 8386.11 OMR. Year End Cash Flow Alternative A Alternative B 0 -1,000 600 1 600 500 2 600 -2,000 3 600 400 4 600 200 5 -2,100 -1,000 6 700 1,386 a) Solve for the Net Present Value of the alternatives A and B using interest rates from 0% upward b) what are the rate of return of the two alternatives c) If your MARR is 8 percent, which alternatives would you select? Comment briefly on your results. What are some problems associated with the ROR method?
- The spot rate: USD 1.21/EUR 2-year USD YTM=0.11% 2-year EUR YTM= -0.72%. Suppose that you invest in the strategy known as the "carry trade". What will be your profit/loss if the spot rate in 2 years is USD 1.00/EUR. PROFIT = $1,100 or THERE IS NO ARBITRAGE OPPORTUNITY IS AN INCORRECT ANSWERTrue or false: The formula An = 1000 + 30n can be used to calculate the final amount in an investment account that pays 0.3% simple interest pa on a capital sum of $1000.4) The BKB Company is considering purchasing a machine for their manufacturing assembly operations. The machine would cost $150,000 and have no salvage value. It would allow them to assemble their product with one less direct labor person. The salary of one assembler for the next three years would be $55,000, $57,500 and $60,000.
- For the following levered total cash flow returns, what is the levered NPV, and should you pursue the investment if your levered discount rate is 14%? Year Total Cash Flow (Pre-Tax) $ 31,795; yes 31,795; no x-31,795; yes -31,795; no 0 (400,000) $ 1 30,000 $ 2 30,900 $ 3 4 31,827 $ 32,782 $ 5 533,765Consider the following money market information being quoted: Which of the following statements is true? Particulars GBP Interest Rate THB Interest Rate Spot Rate 1-year Expected Spot Rate Bid Rate 6.100% 10.550% THB5.6601/GBP THB5.9037/GBP C. Ask Rate 6.125% 10.625% THB5.6622/GBP THB5.9961/GBP a. There is an arbitrage which can only be made by initially borrowing GBP and then investing in THB. b. More than one of the options in this question are correct. The THB is selling at a premium to the GBP in the future. O d. There is an arbitrage which can only be made by initially borrowing THB and then investing in GBP.Suppose you sell a fixed asset for $112,000 when its book value is $112,000. If your company's marginal tax rate is 21 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? Multiple Choice $112,000 $0 $68,320 $34,720