Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca, and the acquisition wou allow Orca to better control its material supply. The current cash flow from assets for Shark is $6.4 million. The cash flows are exp to grow at 9 percent for the next five years before leveling off to 6 percent for the indefinite future. The cost of capital for Orca an Shark is 13 percent and 11 percent, respectively. Shark currently has 3 million shares of stock outstanding and $25 million in debt outstanding. What is the maximum price per share Orca should pay for Shark? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16. Price per share 45 47
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- Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca and the acquisition would allow Orca to better control its material supply. The current cash flow from assets for Shark is $8.4 million. The cash flows are expected to grow at 8 percent for the next five years before leveling off to 5 percent for the indefinite future. The costs of capital for Orca and Shark are 12 percent and 10 percent, respectively. Shark currently has 3 million shares of stock outstanding and $25 million in debt outstanding. What is the maximum price per share Orca should pay for Shark? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca and the acquisition would allow Orca to better control its material supply. The current cash flow from assets for Shark is $7.4 million. The cash flows are expected to grow at 9 percent for the next five years before leveling off to 6 percent for the indefinite future. The costs of capital for Orca and Shark are 13 percent and 11 percent, respectively. Shark currently has 3 million shares of stock outstanding and $25 million in debt outstanding. What is the maximum price per share Orca should pay for Shark? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price per shareSchultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz and the acquisition would allow Schultz to better control its material supply. The current cash flow from assets for Arras is $7.1 million. The cash flows are expected to grow at 7 percent for the next five years before leveling off to 4 percent for the indefinite future. The costs of capital for Schultz and Arras are 11 percent and 9 percent, respectively. Arras currently has 3 million shares of stock outstanding and $25 million in debt outstanding. What is the maximum price per share Schultz should pay for Arras? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Price per share $ 67.63
- Orca Industries is considering the purchase of Shark Manufacturing. Shark is currently a supplier for Orca and the acquisition would allow Orca to better control its material supply. The current cash flow from assets for Shark is $7 million. The cash flows are expected to grow at 8 percent for the next five years before leveling off to 5 percent for the indefinite future. The costs of capital for Orca and Shark are 12 percent and 10 percent, respectively. Shark currently has 3 million shares of stock outstanding and $25 million in debt outstanding. What is the maximum price per share Orca should pay for Shark? 47.42 50.65 75.85 35.45Cameron Enterprises, Inc. is considering launching a new corporate project. The company will have to make Capital Investments, Working Capital investments, andgenerate Cash Flows from Operating the new project. The Equipment required for theproject will cost $3,000,000 today, will last for three years (the length of the project),and is estimated at the time of purchase to sell for $300,000 at the end of its life. Revenue is projected at $5.0M in the first year, $5.3M in the second year, $5.6M in the third year, $5.9 in the fourth year, $6.0M in the fifth year, and $5.0M in the final year. The investment in Net Working Capital is $300,000 initially, with the year-end values at 10% of that year's sales. The company uses Straight-Line depreciation and has a Tax Rate of 27%. The appropriate discount rate for the risks involved is 10%. Per your DCF analysis of the project, what is the cash flow from the change in net working capital in year six? Multiple Choice None of the…Dayton Mechanical, Inc. is currently evaluating a potential new investment. The investment will be financed with 5700,000 of debt and $1,200,000 of equity. The (unleveraged) after-lax cash flows, the CATs, expected to result from the investment are $1 million per year for three years, after which time the project is expected to be sold off for a net after-tax $1 million in cash. The debt financing will take the form of three-year debt with interest payments of 12% per year on the remaining balance. Principal payments will be $100,000 in year 1, $200,000 in year 2, and $400,000 at the end of year 3. The net-benefit-to-leverage factor, T^, is 0.25 for this investment. The (unleveraged) required return for the project is 20%. What is the present value of the interest tax shield from the project?
- "We R Toys" (WRT) is considering expanding into new geographic markets. The expansion will have the same business risk as WRT's existing assets. The expansion will require an initial investment of $50 million and is expected to generate perpetual EBIT of $20 million per year. After the initial investment, future capital expenditures are expected to equal depreciation, and no further additions to net working capital are anticipated. WRT's existing capital structure is composed of $450 million in equity and $225 million in debt (market values), with 10 million equity shares outstanding. The unlevered cost of capital is 9%, and WRT's debt is risk free with an interest rate of 5%. The corporate tax rate is 40%, and there are no personal taxes. a. WRT initially proposes to fund the expansion by issuing equity. If investors were not expecting this expansion, and if they share WRT's view of the expansion's profitability, what will the share price be once the firm announces the expansion plan?…TaiGueLe Enterprises, Inc. is considering launching a new corporate project. The company will have to make Capital Investments, Invest in Changes in Net Working Capital, and generate Cash Flows from Operating the new project. The Equipment required for the project will cost $9,000,000 today, will last for six years (the length of the project), and is estimated at the time of purchase to sell for $600,000 at the end of its life. The company uses Straight-Line depreciation and has a Tax Rate of 20%. The appropriate discount rate for the risks involved is 12%. (Here is the picture attached) In year 6, the firm sells the capital equipment in line with their projection for $600,000. What is the firm's operating cash flow in year 3 ? Multiple Choice $1,209,600 none of the above $2,409,600 $3,819,200 $2,912,000Ancer Food Enterprises, Inc. is considering launching a new corporate project. The company will have to make Capital Investments, Invest in Net Working Capital, and generate Cash Flows from Operating the new project. The Equipment required for the project will cost $8,700,000, will last for six years (the length of the project), and is estimated to be worthless at the end of its useful life. The initial investment in Net Working Capital needs to be $400,000, while the year-end investment in NWC for years 1 - 5 will be 20% of the current year's sales; ending Net Working Capital at the end of year six will be zero. Year One's sales will be $5,200,000 with annual growth at 5%; operating expenses will be 40% of sales. The company uses Straight-Line depreciation and has a Tax Rate of 22%. The appropriate discount rate for the risks involved is 12%. By how much does the Net Present Value of this project change if improved Working Capital Management cuts the required investment in Net…
- Ancer Food Enterprises, Inc. is considering launching a new corporate project. The company will have to make Capital Investments, Invest in Net Working Capital, and generate Cash Flows from Operating the new project. The Equipment required for the project will cost $8,700,000, will last for six years (the length of the project), and is estimated to be worthless at the end of its useful life. The initial investment in Net Working Capital needs to be $400,000, while the year-end investment in NWC for years 1 - 5 will be 20% of the current year's sales; ending Net Working Capital at the end of year six will be zero. Year One's sales will be $5,200,000 with annual growth at 5%; operating expenses will be 40% of sales. The company uses Straight-Line depreciation and has a Tax Rate of 22%. The appropriate discount rate for the risks involved is 12%. By how much does the Net Present Value of this project change if improved Working Capital Management cuts the required investment in Net…Atlantic Corporation is considering the purchase of the linerboard mill and corrugated box plants of Royal Paper for a total price of $260 million. The estimated incremental cash flows that would result if Atlantic acquired the facilities are presented below. Atlantic's marginal tax rate is 36% and their after-tax cost of capital is 13%.a) Calculate the NPV, IRR, and payback period for the acquisition and indicate what you think Atlantic should doOptimal corporation wants to expand their manufacturing facilities. They have two choices, first to expand the current site at a cost of $290,000 per year for two years to complete the expansion, or to sell their current site for $1.3 million and purchase a new larger facility at a cost of $900,000 in the industrial zone. If the annual interest rate is 8%, evaluate the cash flows for the two options described above and decide which is the most financially beneficial to the corporation? [Note: you are supposed to show every step of your calculation and interpret the result.] If Optimal corporation wants to factor inflation in their calculations, what is the equivalent nominal interest rate if expected inflation rate is 4% in the coming years? Critically discuss the significance of including the factor of inflation in corporate finance calculations [Note: remember to use Harvard referencing to reference your sources]