1) JH Inc. is thinking of acquiring Verch Inc. JH expects Verch's NOPAT to be= $90 million the 1st year, with no net new investment in operating capital and no interest expense. For 2nd year, Verch is expected to have NOPAT of $200 million. Furthermore, in 2nd year only, Verch will require= $180 million of net new investment in operating capital. Verch's marginal tax rate is 25%. After the second year, the free cash flows and tax shields from Verch to JH will both rise at the constant rate of 3%, JH has determined that Verch's cost of equity is 35%, and Verch presently has no debt outstanding. Suppose that all cash flows happen at the end of year, JH should pay $26 million to acquire Verch. Determine the NPV of proposed acquisition?
2) If MSFT were to pay its present dividend for next 200 years and investors consider the suitable discount rate for this stream of dividends to be 12% what would be current value of dividend stream. What if you suppose that dividend payment is made in 4 quarterly instalments rather than annually?
If you invest an amount of MSFT dividend once years for 30 years how much will accrued value of these investments be worth at the ending of thirty years. Let us say that return on the investments is 2% per year compounded annually.
Write down actual cash flows of the corporate bond. You can choose the bond. Website that has this information is FINRA. https://finra-markets.morningstar.com/MarketData/Default.jsp.