Question

could you please answer now..? Suppose a firm with 3 business units - J, H &...

could you please answer now..?

Suppose a firm with 3 business units - J, H & K - has an overall WACC of 12%. Invested capital in each unit earns the following returns:

J = 7%

H = 12%

K = 15%

The firm's stakeholders would best be served by:

Growing unit K while divesting unit H
Growing all units since each has a positive rate of return
Growing unit J while divesting unit K
Growing unit K while divesting unit J

Flag this Question

Question 24 pts

According to the theory of Conservation of Value, an acquisition will create value if:

The cash flow of the merged firm is higher than the sum of the cash flows of the two firms prior to the acquisition
The combined P/E ratio of the resulting company is greater than that of the P/E ratio of the bidder prior to the acquisition
The resulting EPS of the merged firm is higher than that of the acquired firm prior to the acquisition
The revenue of the merged firm is greater than that of the sum of the revenues of the two firms prior to the acquisition

Flag this Question

Question 34 pts

Suppose firm GHI has a return on invested capital of 14% and a cost of capital of 10%. The firm's market value is $28 million and you believe the firm to be fairly valued by the market. GHI's investors have deposited capital in the firm worth approximately:

$14.0 million
$28.0 million
$39.2 million
$20.0 million

Flag this Question

Question 44 pts

Suppose firm RST has a return on invested capital of roughly 22% and desires to grow revenue by 5% for the foreseeable future to meet growth in the market for its services. Assuming a constant asset turnover, in order to fund this growth with internal capital RST will need to retain approximately ______ of its earnings.

0%
5%
110%
23%

Flag this Question

Question 54 pts

Suppose firm PQR has a current return on invested capital of 8% and plans to grow at 15% over the next several years. Which of the following is most true?

PQR's best course of action would be to grow at a less brisk rate
PQR cannot grow at 15% until they increase ROIC to at least 15%
PQR will likely go out of business soon
Near term, PQR will have negative cash flow and thus will have to raise additional capital

Homework Answers

Answer #1

Question 14). Answer :- Option B). Growing all units since each has a positive rate of return.

Question 24). Answer :- Option A). The cash flow of the merged firm is higher than the sum of the cash flows of the two firms prior to the acquisition.

Question 34). Answer :- Option C). $ 39.2 Million.

Question 44). Answer :- Option D). 23 %

Explanation :- Retention ratio = Growth rate / Return on invested capital

= 0.05 / 0.22

= 0.23 i.e., 23 % (approx).

Question 54). Answer :- Option D). Near term, PQR will have negative cash flow and thus will have to raise additional capital.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
step by step solution for the below question please Flag this Question Question 11 pts What...
step by step solution for the below question please Flag this Question Question 11 pts What is the difference between positive economics and normative economics? Group of answer choices Positive economics deals with dynamic systems, while normative economics focuses on static systems. Normative economics deals with how the world actually works, whereas positive economics focuses on what people ought to do. Positive economics requires making value judgments, while normative economics relies solely on factual statements. Normative economics applies in cases...
The Record, Inc. is a firm that archives computer records of numerous business firms to save...
The Record, Inc. is a firm that archives computer records of numerous business firms to save them computer space and yet allow them easy retrieval. The firm has one million common shares outstanding. The growth rate for Records, Inc. is five percent, and analysts expect it to remain constant for the foreseeable future. The last dividend paid (D0) was $0.95. Investors' required rate of return is 15 percent. a. What is the current value or price of the Record's stock?...
Check my workCheck My Work button is now disabled1 Item 3 Item 3 The table below...
Check my workCheck My Work button is now disabled1 Item 3 Item 3 The table below shows the production possibilities for Concordia and Harmonia. Suppose that Richland and Prosperity have the output figures shown in the table below. AVERAGE PRODUCT PER WORKER Wheat Wine Richland 3 bushels or 1 barrels Prosperity 1 bushels or 2 barrels Assume that cost and productivity remain constant. Round your answers below to 2 decimal places. a. What is the opportunity cost of producing one...
1. You have been hired by the Board of Directors of firm XYZ as a part...
1. You have been hired by the Board of Directors of firm XYZ as a part of a team, tasked with the valuation of a potential acquisition target. You have collected the following publicly available information about the target company: • The common stock of the company is currently selling for an average of $40 per share. There are 6.5 million shares outstanding. The annual dividend that the company just paid was $2.60 per share. • The company has two...
Question 1. (Total: 25 marks) You want to buy a car valued at $48,000. You wi...
Question 1. (Total: 25 marks) You want to buy a car valued at $48,000. You wi ll make an upfront down -payment of $5,000 on the car , and borrow the rest of the money from your bank. Your bank will give you a 5- year loan at 2.5% APR compounded semi -annually . You plan to make biweek ly payments (i.e., one payment every two weeks) on the loan . The bank requires that you make the first payment...
All else equal, an increase in customers' reservation prices will have what effect on the value...
All else equal, an increase in customers' reservation prices will have what effect on the value generated by a business? It will be unaffected It will decrease It will increase Question 2 An increase in the value of resources in an alternate use will have what effect on the ability of a company to generate value using those resources? it will be unaffected It will decrease It will increase Question 3 Which sequence of planning communication is most appropriate? Analyze...
Please show work/formulas and financial calculator steps, if used. Answer as much as you can (The...
Please show work/formulas and financial calculator steps, if used. Answer as much as you can (The following information applies to Problems 1-4) The Collins Group, a leading producer of custom automobile accessories, has hired you to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below. Assets Current assets                                        $ 38,000,000 Net plant, property, and equipment                    101,000,000 Total assets                                          $139,000,000 Liabilities and Equity Accounts payable                                      $ 10,000,000 Accruals                                                9,000,000 Current liabilities                                   $...
Repackaging a Global Brand: A Case Study Analyzing the Capital Expenditure Decision INTRODUCTION It is early...
Repackaging a Global Brand: A Case Study Analyzing the Capital Expenditure Decision INTRODUCTION It is early 2014. A leading global skincare manufacturer, Health & Beauty Co. (HBC), has been losing market share in the hand and body lotion market. While the firm still leads its competitors in market share in this segment of personal care, it seeks to stem further share erosion and, to that end, has recently developed a strategy to recover market share through rebranding, advertising, and repackaging....
please show work thank you!!!!!!! 1. Bank of RGV is a successful regional bank with common...
please show work thank you!!!!!!! 1. Bank of RGV is a successful regional bank with common equity share outstanding 1 million. It pays $10 dividend each year and expected to grow 5% in period 1. The appropriate discount rate to reflect shareholder risk is 10%. Answer below question using below data pertains to Bank of RGV: Below numbers are in 1000’s. Balance sheet                                                      Income statement Cash                                                   $100                Interest income                                       $400                                        Securities investments                         $600                interest expense...
In narrative essay format, I want you to address a business/organization case study using multiple concepts...
In narrative essay format, I want you to address a business/organization case study using multiple concepts from class. The case question and case text begin on page 5 of this document. You need to demonstrate their best understanding of management and organizational behavior theory, and the application of those ideas to improve the understanding of various issues. You need to clearly identify at least 3 distinct, substantive issues. For each issue you need to 1), identify evidence from the case...