--%>
Assignment Help - homework help

Explain the structure Debt/Shareholders’ Equity

Our company (A) is going to buy the other company (B). We need to value the shares of B and, thus, we will use three options of the structure Debt/Shareholders’ Equity in order to obtain the WACC as:

1) Present structure of A and B, and

2) Structure used by A to finance the acquisition of B’s shares.

We will value the company B through applying these three options and then take as a reference average of the results. Is it correct?

E

Expert

Verified

That average has no sense. The relevant structure is the same to the one in three, but none of the ones specified is correct. The correct valuation is difference among the values of (A+B) after acquisition minus the value of A today.

   Related Questions in Corporate Finance

  • Q : Porters Secondary activities Porter's

    Porter's Secondary activities: 1. Procurement: • Identification process of raw material.• Identification process of identifying probable suppliers.• Process of purchasing and calling quotes. 2. Human Resource management:

    		•
  • Q : Define Credit and Collections Credit &

    Credit & Collections: Usually, credit is stated as the procedure of providing a loan, in which one party transfers wealth to the other with the expectation that it will be re-paid in full plus interest. The definition of collections is connected t

    		•
  • Q : Problem on implied exchange rate a) The

    a) The Australian firm sold a ship to a Swiss firm and gave the Swiss client an option of paying either AUS10,000 or SF15,000 in 9 months. (i) In above, the Australian firm efficiently gave the Swiss client a free option to buy up

    		•
  • Q : Affect the value of the stock Is the

     Is the value of this stock dependent on how long you plan to hold it? In other words, if your planned holding period were 2 years or 5 years rather than 3 years, would this affect the value of the stock today, P0? Explain your answer.<

    		•
  • Q : Define Effective Utilization of Funds

    Effective Utilization of Funds: It is just the decision to maximize the return on investment of funds. When finance manager is not capable to raise the return by investing fund in profitable assets or other profitable projects, company’s busines

    		•
  • Q : Could we explain that goodwill is equal

    Could we explain that goodwill is equal to brand value?

    		•
  • Q : Which taxes do I have to use for

    Which taxes do I have to utilize when calculating Free Cash Flow (FCF) – is this the medium tax rate or the marginal tax rate of the leveraged company?

    		•
  • Q : Data Case Please assist with the

    Please assist with the attached Data Case assignment

    		•
  • Q : Liquidity Ratios Liquidity Ratios :

    Liquidity Ratios: Such ratios comprise the Current Ratio and the Quick Ratio or the acid test ratio. Liquidity ratios demonstrate the Liquid position of a company in the short term that is the capability of a firm to pay its obligations in short term.

    		•
  • Q : Describe nominal gross domestic product

    Nominal gross domestic product: If GDP of a particular year is estimated on the base of price of similar year, it is termed as nominal GDP.

    		•