Corporate Finance II: Financing Investments and Managing Risk | Online Course Support

Suppose an acquirer is buying a target for a price of 50B for the equity of the target. The target has no cash and 20B in debt. The acquirer currently has debt equal to 30B. The acquirer is not using any of its own cash to finance the deal and is paying for the acquisition in cash. The acquirer’s current equity value is 100B dollars (prior to the deal). The acquirer’s equity value did not change when the acquisition was announced. The leverage ratio of the acquirer following the deal is ________.

4. Question 4 Suppose an acquirer is buying a target for a price of 50B for the equity of the target. The target has no cash and 20B in debt….

Corporate Finance II: Financing Investments and Managing Risk | Online Course Support

Suppose that the exchange ratio for a stock deal between these two firms has been set as 0.3 shares of the acquirer for each share of the target. What is the premium that the acquirer is paying for the target if the value of the acquirer is still 20 dollars a share after the transaction?

1. Question 1     Pre-deal value Shares out Stock Price Acquirer 200 10 20 Target 50 10 5 Neither the acquirer nor the target has any debt (debt =…

Corporate Finance II: Financing Investments and Managing Risk | Online Course Support

The private equity fund is considering a proposal to finance this acquisition with 1B in new debt and 500M in equity from the private equity fund. The new debt will come from a new bank loan at an interest rate of 6%. The private equity fund has estimated that it can increase the company’s EBIT by 10% starting in 2018. The private equity fund is also reducing dividends and share repurchases to zero starting in 2016. Other forecasts are unchanged.

9. Question 9 A private equity fund has produced the following forecasts for a potential target fora LBO prior to the LBO (pre-LBO). Data are in millions of dollars.  …

Corporate Finance II: Financing Investments and Managing Risk | Online Course Support

Suppose an acquirer is buying a target for a price of 50B for the equity of the target. The target has no cash and 20B in debt. The acquirer currently has debt equal to 30B. The acquirer is not using any of its own cash to finance the deal and is paying for the acquisition in cash. The acquirer’s current equity value is 100B dollars (prior to the deal). The acquirer’s equity value did not change when the acquisition was announced. Which of the following option is correct?

5. Question 5 Suppose an acquirer is buying a target for a price of 50B for the equity of the target. The target has no cash and 20B in debt….

Corporate Finance II: Financing Investments and Managing Risk | Online Course Support

Question 2 Pre-deal value Shares out Stock Price Acquirer 200 10 20 Target 50 10 5 Neither the acquirer nor the target has any debt (debt = 0). Suppose now that the acquirer is paying cash for this acquisition. Which of the following is true?

2. Question 2   Pre-deal value Shares out Stock Price Acquirer 200 10 20 Target 50 10 5 Neither the acquirer nor the target has any debt (debt = 0)….

Corporate Finance II: Financing Investments and Managing Risk | Online Course Support

A private equity fund has produced the following forecasts for a potential target fora LBO prior to the LBO (pre-LBO). Data are in millions of dollars.

7. Question 7 A private equity fund has produced the following forecasts for a potential target fora LBO prior to the LBO (pre-LBO). Data are in millions of dollars.  …

Corporate Finance II: Financing Investments and Managing Risk | Online Course Support

Suppose an acquirer is buying a target for a price of 50B for the equity of the target. The target has no cash and 20B in debt. The acquirer currently has debt equal to 30B. The acquirer is not using any of its own cash to finance the deal and is paying for the acquisition in cash. The acquirer’s current equity value is 100B dollars (prior to the deal). The acquirer’s current leverage ratio (prior to the deal) is _______.

3. Question 3 Suppose an acquirer is buying a target for a price of 50B for the equity of the target. The target has no cash and 20B in debt….

Corporate Finance II: Financing Investments and Managing Risk | Online Course Support

A private equity fund has produced the following forecasts for a potential target fora LBO prior to the LBO (pre-LBO). Data are in millions of dollars. Sep-30-2016E Sep-30-2017E Sep-30-2018E Sep-30-2019E Sep-30-2020E EBIT 150.00 154.50 159.14 163.91 168.83 Interest 65.00 65.00 65.00 65.00 65.00 Net Income 85.00 89.50 94.14 98.91 103.83 Depreciation 90.00 92.70 95.48 98.35 101.30 Operating cash flow 175.00 182.20 189.62 197.25 205.12 Capital expenditures -100.00 -103.00 -106.09 -109.27 -112.55 Dividend payments -30.00 -30.00 -30.00 -30.00 -30.00 Share repurchases -30.00 -30.00 -30.00 -30.00 -30.00 Change in cash 15.00 19.20 23.53 27.98 32.57 Note: I am assuming that taxes are zero for simplicity, so net income = EBIT –Interest.

8. Question 8 A private equity fund has produced the following forecasts for a potential target fora LBO prior to the LBO (pre-LBO). Data are in millions of dollars.  …