2. ENTERPRISE VALUE A firm’s enterprise value is equal to the market value of its debt...
2. ENTERPRISE VALUE A firm’s enterprise value is equal to the market value of its debt and equity, less the firm’s holdings of cash and cash equivalents. This figure is particularly of interest to potential purchasers of the firm. Why?
Homework Answers
Enterprise value includes debt in the calculation of a company's value. It is a more accurate reflection because of inclusion of debt. The purchaser needs to take over the debt obligations of the company as well. It will take over the debt but also keep cash. This provides a more accurate picture and is different from market capitilization.
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2. ENTERPRISE VALUE A firm’s enterprise value is equal to the
market value of its debt...
1. AGENCY PROBLEMS Who owns a corporation? Describe the process whereby the owners control the firm’s...
1. AGENCY PROBLEMS Who owns a corporation? Describe the process whereby the owners control the firm’s management. Describe the main reason why an agency relationship exists in the corporate form of organization. In this context, describe the types of problems that can arise. 2. ENTERPRISE VALUE A firm’s enterprise value is equal to the market value of its debt and equity, less the firm’s holdings of cash and cash equivalents. This figure is particularly of interest to potential purchasers of...
A firm has a reported enterprise value of $42.00 billion. The firm has $12.00 billion of...
A firm has a reported enterprise value of $42.00 billion. The firm has $12.00 billion of debt on its balance sheet, and $1.00 billion in cash. The firm also reports $7.00 billion in shareholder equity with 500.00 million shares outstanding. Finally, the firm reported $770.00 million in net income last year. If the enterprise value is correct, what is the market capitalization or market value of the firm’s common equity? (express in billions)
2. (20 Marks) China Holdings (CH) has an capitalization of $10.8 billion, and an enterprise value...
2. (20 Marks) China Holdings (CH) has an capitalization of $10.8 billion, and an enterprise value of $14.4 billion. In addition, CH has a debt cost of capital of 6.1 % and its marginal tax rate is 35% equity cost of capital of 10 % , a market a. (5 marks) Briefly explain the difference between a company's WACC and its expected return on equity. Give an example of where you would use a company's WACC to discount future cash...
Market value of debt of YTU Co. is equal to market value of its equity. Company...
Market value of debt of YTU Co. is equal to market value of its equity. Company has no preferred stock. If cost of equity of the company is four times its before-tax cost of debt and weighted average cost of capital is 2.4 times its before-tax cost of debt, what must be the corporate tax rate?
Dippy Donuts' total assets equal $17 million. Its book value of equity is $7 million. Excess...
Dippy Donuts' total assets equal $17 million. Its book value of equity is $7 million. Excess cash is $150,000. The market value of equity is $10 million and Debt to Enterprise Value ratio is 50%. What is the book value of Dippy's interest bearing debt?
A levered firm’s cost of equity capital is 15%. The firm has a market value of...
A levered firm’s cost of equity capital is 15%. The firm has a market value of equity of $15 million and $5 million in outstanding debt at an interest rate of 5%. The corporate tax rate is 35%. What is the firm’s WACC?
Calculate the net debt of a firm with a market capitalization ( market value of equity) of $49 Billion
Calculate the net debt of a firm with a market capitalization ( market value of equity) of $49 Billion, market value of debt of $22 Billion, and $7 Billion in cash and equivalents. [Note: Enter your answer in Billions; for example, if you calculate the net debt to be $10 Billion, then enter just 10 in the answer box.]
The company has the following market values of debt and equity: Market value of debt: $50...
The company has the following market values of debt and equity: Market value of debt: $50 Market value of equity: $50 Therefore, the total market value of the assets is $100. The firm has 10 shares outstanding; therefore, the current price per share is $5. The managers are considering an investment project with an initial cost of 30. They believe that the project should be worth $40. The company announces that it will issue new common stocks to obtain $30....
13. Given the enterprise value calculation below, show the necessary adjustments and pro forma amounts if...
13. Given the enterprise value calculation below, show the necessary adjustments and pro forma amounts if the company issues $100.0 milion of equity and uses the proceeds to repay debt. 困(S in millions) Pro forma 2007 Actual Adjustments 2007 Equity Value Plus: Total Debt Plus: Preferred Stock Less: Cash and Cash Equivalents $1,000.0 250.0 50.0 70.0) $1,230.0 Enterprise Value
uestion 7(1 point) Calculate the net debt of a firm with a market capitalization (market value...
uestion 7(1 point) Calculate the net debt of a firm with a market capitalization (market value of equity) of $72 Billion, market value of debt of $22 Billion,, and $6 Billion in cash and equivalents. [Note: Enter your answer in Billions; for example, if you calculate the net debt to be $10 Billion, then enter just 10 in the answer box.]
2. (20 Marks) China Holdings (CH) has an capitalization of $10.8 billion, and an enterprise value of $14.4 billion. In addition, CH has a debt cost of capital of 6.1 % and its marginal tax rate is 35% equity cost of capital of 10 % , a market a. (5 marks) Briefly explain the difference between a company's WACC and its expected return on equity. Give an example of where you would use a company's WACC to discount future cash...
Dippy Donuts' total assets equal $17 million. Its book value of equity is $7 million. Excess cash is $150,000. The market value of equity is $10 million and Debt to Enterprise Value ratio is 50%. What is the book value of Dippy's interest bearing debt?
13. Given the enterprise value calculation below, show the necessary adjustments and pro forma amounts if the company issues $100.0 milion of equity and uses the proceeds to repay debt. 困(S in millions) Pro forma 2007 Actual Adjustments 2007 Equity Value Plus: Total Debt Plus: Preferred Stock Less: Cash and Cash Equivalents $1,000.0 250.0 50.0 70.0) $1,230.0 Enterprise Value
uestion 7(1 point) Calculate the net debt of a firm with a market capitalization (market value of equity) of $72 Billion, market value of debt of $22 Billion,, and $6 Billion in cash and equivalents. [Note: Enter your answer in Billions; for example, if you calculate the net debt to be $10 Billion, then enter just 10 in the answer box.]
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