Feasibility of a Divestiture Merton, Inc., has a subsidiary in
Bulgaria that it fully finances with...
Feasibility of a Divestiture Merton, Inc., has a subsidiary in
Bulgaria that it fully finances with its own equity. Last week, a
firm offered to buy the subsidiary from Merton for $60 million in
cash, and the offer is still available this week as well. The
annualized long-term risk-free rate in the United States increased
from 7 to 8 percent this week. The expected monthly cash flows to
be generated by the subsidiary have not changed since last week.
The...
12. A U.S. MNC owns a subsidiary in France that generates
substantial earnings in euros each...
12. A U.S. MNC owns a subsidiary in France that generates
substantial earnings in euros each year. One week ago, it received
an offer from a company to purchase the subsidiary, and it has not
yet responded. Since last week, long-term interest rates in the
U.S. have decreased. Will the NPV of the divestiture be larger or
smaller or stay the same as it was last week?
a.
Smaller, because the PV of what the firm gives up has
increased....
Comparative consolidated balance sheet data for Iverson, Inc.,
and its 80 percent–owned subsidiary Oakley Co. follow:...
Comparative consolidated balance sheet data for Iverson, Inc.,
and its 80 percent–owned subsidiary Oakley Co. follow:
2018
2017
Cash
$
5,250
$
13,050
Accounts
receivable (net)
38,800
26,500
Merchandise
inventory
96,850
48,250
Buildings and
equipment (net)
105,100
117,000
Trademark
109,000
125,500
Totals
$
355,000
$
330,300
Accounts
payable
$
89,000
$
75,000
Notes payable,
long-term
0
31,300
Noncontrolling
interest
55,200
48,000
Common stock,
$10 par
200,000
200,000
Retained
earnings (deficit)
10,800
(24,000
)
Totals
$
355,000
$
330,300
Additional Information...
ABC Inc. has a net income of $2,000 and falls in the 21% tax
rate. The...
ABC Inc. has a net income of $2,000 and falls in the 21% tax
rate. The firm made an interest payment of $400 during the year and
the depreciation for the year was $500. During the year, the net
fixed assets increased by $1000. Cash decreased by $100,
inventories decreased by $50, receivables increased by $100,
payables declined by $125, and the short term debt for the company
increased by 200. The firm saw its common stock and paid in...
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when...
Last Tuesday, Blue Hamster Manufacturing Inc. lost a portion of
its planning and financial data when both its main and its backup
servers crashed. The company’s CFO remembers that the internal rate
of return (IRR) of Project Delta is 11.3%, but he can’t recall how
much Blue Hamster originally invested in the project nor the
project’s net present value (NPV). However, he found a note that
detailed the annual net cash flows expected to be generated by
Project Delta. They...
Last Tuesday, Green Caterpillar Garden Supplies Inc. lost a
porion of its planning and financial data...
Last Tuesday, Green Caterpillar Garden Supplies Inc. lost a
porion of its planning and financial data when its server and its
backup server crashed. The company's CFO remembers that the
internal rate of return (IRR) of project Gamma is 11.3%, but he
can't recall how much Green Caterpillar originally invested in the
project nor the project's net present value (NPV). However, he
found a note that contained the annual net cash flows expected to
be generated by Project Gamma. They...
Genesis Corp. is a traditional retailer that recently also
started an Internet-based subsidiary that sells its...
Genesis Corp. is a traditional retailer that recently also
started an Internet-based subsidiary that sells its product online.
Its sales in September 2017 were $700,000. Tom Scott, the company
president, is preparing for a meeting with Dan Harris, a loan
officer with Mojito Bank, to review year end financing
requirements. After discussions with the company’s marketing and
finance managers, sales over the next three months were forecasted
as follows. Sales in October 2017: $2,500,000, sales in November
2017: $3,500,000 and...
On June 30, 2018, Plaster, Inc., paid $988,000 for 80 percent of
Stucco Company's outstanding stock....
On June 30, 2018, Plaster, Inc., paid $988,000 for 80 percent of
Stucco Company's outstanding stock. Plaster assessed the
acquisition-date fair value of the 20 percent noncontrolling
interest at $247,000. At acquisition date, Stucco reported the
following book values for its assets and liabilities:
Cash
$
64,500
Accounts receivable
136,900
Inventory
219,200
Land
70,400
Buildings
189,400
Equipment
324,300
Accounts payable
(37,700
)
On June 30, Plaster allocated the excess acquisition-date fair
value over book value to Stucco's assets as follows:...
Question 18
Question
Droz's Hiking Gear, Inc. has found that its common
equity capital shares have...
Question 18
Question
Droz's Hiking Gear, Inc. has found that its common
equity capital shares have a beta equal to 1.5 while the risk-free
return is 8 percent and the expected return on the market is 14
percent. It has 7-year semiannual maturity bonds outstanding with a
price of $767.03 that have a coupon rate of 7 percent. The firm is
financed with $140,000,000 of common shares (market value) and
$60,000,000 of debt. Droz's, is subject to a 35 percent...
QUESTION 9
Other things held constant, what happens with a short CCC?
a.
The firm’s working...
QUESTION 9
Other things held constant, what happens with a short CCC?
a.
The firm’s working capital management is more effective.
b.
The firm’s administrative costs are more effective.
c.
The firm’s inventory management is more effective..
d.
The firm’s working capital management is less effective.
1 points
QUESTION 10
Which statement best describes short-term versus long-term
financing?
a.
The flexibility, cost, and riskiness of short-term versus
long-term credit are dependent on the type of credit that is
actually...