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soldi70 [24.7K]
3 years ago
14

Siebel Incorporated, a non-publicly traded company, has 2009 after-tax earnings of $25 million, which are expected to grow at 6

percent annually into the foreseeable future. The firm is debt-free, capital spending equals the firm's rate of depreciation; and the annual change in working capital is expected to be minimal. The firm's beta is estimated to be 2.5, the 10-year Treasury bond is 5 percent, and the historical risk premium of stocks over the risk-free rate is 6.0 percent. Publicly-traded Rand Technology, a direct competitor of Siebel's, was sold recently at a purchase price of 10 times its 2009 after-tax earnings, which included a 25 percent premium over its current market price. Aware of the premium paid for the purchase of Rand, Siebel's equity owners would like to determine what it might be worth if they were to attempt to sell the firm in the near future. They chose to value the firm using the discounted cash flow and comparable recent transactions methods. They believe that either method provides an equally valid. Estimate of the firm's value.
a What is the value of Siebel using the DCF method?
b What is the value using the comparable recent transactions method?
c What would be the value of the firm if we combine the results of both methods?
Business
1 answer:
Readme [11.4K]3 years ago
8 0

Answer:

Answer of each requirement is given seperatly below.

a What is the value of Siebel using the DCF method?

Value under DCF = CF * (1+growth rate)/ (WAAC" -Growth rate)

Putting values (assuming after tax earning is all in cash)

Value of SI = 25 (1+6%)/ 20%-6% = 189 million dollars

 

"WAAC calculation

Here WAAC is equal to cost of equity (ke) as company is debt free.

so

Ke = risk free rate + beta (risk premium)

    = 5 + 2.5 (6) = 20%

b What is the value using the comparable recent transactions method?

Based on recent tansaction the value of siebel incorporated will be               calculated as shown below

 Value of SI = Profit afte * 10 = 25 * 10 = 250 million dollars

Publicly-traded Rand Technology, a direct competitor of Siebel's sale is taken as bench mark.

c What would be the value of the firm if we combine the results of both methods?

By combining value of both value technique we get 189 + 250 = 439 million dollars.

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Use the following information to prepare the September cash budget for PTO Co. The following information relates to expected cas
dolphi86 [110]

Answer:

Begining Cash               40,000

receipts from sales      255,000

payment to supplies    (104,500)

payment of wages         (40,000)

other cash expenses<u>     (60,000)   </u>

Ending Cash                    90,500

Explanation:

raw materials disbursment for the month of september

80,000  x 35%  =  28,000 for August purchases

110,000  x 65%  =  <u> 71,500 </u>for September purchases

Total payment      104,500  

the depreciation and accrued expenses along with the interest payable (which are also a accrued expense) will not be included as they don't represent neither a cash inflow nor outflow.

8 0
3 years ago
Garnett Co. expects to purchase $180,000 of materials in July and $210,000 of materials in August. Three-fourths of all purchase
Savatey [412]

Answer:

The correct option is B.

Explanation:

It is given that Garnett Co. expects to purchase $180,000 of materials in July and $210,000 of materials in August.

Purchase in July = $180,000

Purchase in August = $210,000

Three-fourths of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase.

In August, the cash disbursements for materials purchases be 3/4th of $210,000 (Purchase in August) and 1/4  of $180,000 (Purchase in July).

August's cash disbursements for materials purchases be

Amount=\frac{3}{4}\times 210000+\frac{1}{4}\times 180000

Amount=157500+45000

Amount=202500

The August's cash disbursements for materials purchases be $202500. Therefore the correct option is B.

4 0
3 years ago
Effectiveness means:
Usimov [2.4K]

Effectiveness means producing the desired result with an application of minimum effort, expense, and waste.

<h3>What is effectiveness?</h3>

When a firm or a producer produces goods or services by application of the available resources in the best possible way, ensuring their optimum utilization, the firm is engaged in bringing effectiveness in production.

Hence, option B holds true regarding effectiveness.

Learn more about effectiveness here:

brainly.com/question/24230098

#SPJ1

7 0
1 year ago
Define liquidity. Rank the following assets in terms of liquidity, from most to least liquid: money market mutual fund, savings
valina [46]

Answer:

Liquidity: amount of cash or cash equivalents and its primary feature of converting quickly into money without losing any of it current value.

1)_ Dollar bill

2)_ Saving account

3)_ Checking account

4)_ Gold bar

5)_ Corporate stock

6)_ Money market mutual fund

7)_ House

Explanation:

To begin with, the liquidity is the feature of those assets to converting the most quickly as possible in cash and therefore the the most liquid asset is properly the dollar bill and the less liquid asset is the house due to the fact that it could take years to sell by a proper offer and becoming actual cash. In conclusion, it works that way with all the other assets, the liquidity of each one is higher or lower depending on the quickness of converting into cash.

3 0
2 years ago
McConnell Corporation has bonds on the market with 15.5 years to maturity, a YTM of 6.2 percent, a par value of $1,000, and a cu
VLD [36.1K]

Answer:

Coupon rate is 6.4%

Explanation:

The coupon payment on a bond can be computed from a formula of current price of a bond

current price of a bond=coupon amount/yield to maturity

coupon amount=current price *yield to maturity

current price is $1039

yield to maturity is 6.2%

coupon rate =$1039*6.2%

                    =$64.42

Coupon rate=coupon amount/par value of bond

coupon amount $64.42

par value of bond=$1000

coupon rate =$64.42/$1000

                     =6.4%

7 0
3 years ago
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