Mergers and Acquisitions | homework crew
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Extra Credit question please read Mergers and Acquisitions lectureTitle: Corporate Finance ISBN: 9781259918940 Authors: Ross, Westerfield, Jaffe and JordanPublisher: McGraw Hill Edition: 12th (11th Edition is OK)Please use the information below to complete this assignment. All answers should be typed in word format and submitted to Canvas under the extra credit module (you will see it listed under modules). This extra credit assignment will give you up to 5 points added to your semester grade. So please make sure you are diligent with your answers. You must show your work Step by step and correct answers will not count unless your work is shown. This is NOT a group project. This is also a copyrighted question. If this question is posted to any “homework” websites, it will be considered academic dishonesty and addressed accordingly.BULL Inc. who is a publicly traded company is considering acquiring BEAR Inc. which is a private company. Please use the information and methods taught to you in class and construct an NPV analysis. You conclusion should state whether this acquisition is a good idea. Remember that you should first find the price of BEAR Inc using the appropriate WACC and then evaluate the acquisition from BULL’s perspective as an investment. The next page includes the information you are provided.Please use Table # 1,2,3 and 4 Table #1 BULL BEARDebt/Equity 2/3 1/2Tax Rate 20% 25%Beta 2 N/AS&P 500 Return 15% 15%10-year T-Bond 2% 2%Growth Rate 3% 5%Cost of Debt See Bond info 9%Table #2 Anticipated FCFs for BEARYear 1 $540,000Year 2 ($120,000)Year 3 $220,000Year 4 $300,000Year 5 $310,000Table #3 Comparable Companies to BEAR IncDebt (in millions) Equity (in millions) Stock Price (market) # Shares Outstanding BetaCompany A 30 30 $5 8,000,000 1.1Company B 10 50 $7 11,000,000 1.5Company C 50 80 $10 7,000,000 3.5Company D 35 20 $2 9,000,000 2.1Table #4 Bond Information for BULL Inc.Price $950Face Value $1,000Years to Maturity 8Coupon Rate 10% Paid semi-annually
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