--%>
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 : Who proposed modern quantitative

    Who proposed a modern quantitative methodology for portfolio selection?

    		•
  • Q : Problem on Yield to maturity Shawna

    Shawna desires to invest her recent bonus in a 4-year bond which pays a coupon of 11 % semi-annually. The bonds are selling at $962.13 nowadays. When she buys such bond and holds it to the maturity, what would be her yield? (Round to the nearest answer.) (i) 11.5%&nbs

    		•
  • Q : Define the term Stock Market crash

    Stock Market Crash was responsible for the Great Depression. Middle class families lost all their savings as they had gambled the market on margin.Those banks which were under the loan ofbrokers’ started removing money out of the savings account

    		•
  • Q : Explain Cost of capital aspect Cost of

    Cost of capital aspect: Estimation of WCR is beneficial from the point of view of cost of capital too. A sound working capital position is beneficial from the point of view of both owners and lenders of the company. A sufficiently positive position me

    		•
  • Q : What are capital investment The capital

    The capital investment appraisal techniques such as NPV, IRR, ARR, PV and Time value of money have become irrelevant post Celtic Tiger. Due to the depth of the recession companies do not have budgets to invest. Discus First use this information when you are writing this essay: 1.&

    		•
  • Q : Is depreciation is the loss of value of

    Is the depreciation is the loss of value of fixed assets?

    		•
  • Q : Operational efficiency and

    Distinguish between Operational efficiency and informational efficiency?

    		•
  • Q : What are Workpapers Workpapers : In

    Workpapers: In finance world, work papers are documents which are created during the procedure of computing the financial records of a business or individual. The accounting professional which is tasked with examining the book-keeping of a business mi

    		•
  • Q : What is Stock Market Stock Market : To

    Stock Market: To trade company shares (or stock) and derivatives, a stock market or equity market is public entity where these shares and derivatives are sold at agreed price. These are to be listed on a stock exchange in order to trade publicly.

    		•
  • Q : What is the current example of a value

    What is the current example of a value company and would you buy it as an investment. Why or why not?

    		•