Questions from Corporate Finance

Q: You are invested in GreenFrame, Inc. The CEO owns 3

You are invested in GreenFrame, Inc. The CEO owns 3% of GreenFrame and is considering an acquisition. If the acquisition destroys $50 million of GreenFrame’s value, but the present value of the CEO’s...

Q: Sora Industries has 60 million outstanding shares, $120 million in

Sora Industries has 60 million outstanding shares, $120 million in debt, $40 million in cash, and the following projected free cash flow for the next four years (see MyFinanceLab for the data in Excel...

Q: Consider the valuation of Nike given in Example 10.1.

Consider the valuation of Nike given in Example 10.1. a. Suppose you believe Nike’s initial revenue growth rate will be between 7% and 11% (with growth always slowing linearly to 5% by year 2015). Wha...

Q: You notice that Dell Computers has a stock price of $27

You notice that Dell Computers has a stock price of $27.85 and EPS of $1.26. Its competitor Hewlett-Packard has EPS of $2.47. What is one estimate of the value of a share of Hewlett-Packard stock?

Q: Now suppose that with leverage, Kohwe’s expected free cash flows will

Now suppose that with leverage, Kohwe’s expected free cash flows will decline to $9 million per year due to reduced sales and other financial distress costs. Assume that the appropriate discount rate...

Q: CSH has EBITDA of $5 million. You feel that an

CSH has EBITDA of $5 million. You feel that an appropriate EV/EBITDA ratio for CSH is 9. CSH has $10 million in debt, $2 million in cash, and 800,000 shares outstanding. What is your estimate of CSH’s...

Q: After researching the competitors of EJH Enterprises, you determine that most

After researching the competitors of EJH Enterprises, you determine that most comparable firms have the following valuation ratios (see MyFinanceLab for the data in Excel format): EJH Enterprises has...

Q: Suppose that in May 2010, Nike had EPS of $3

Suppose that in May 2010, Nike had EPS of $3.51 and a book value of equity of $18.92 per share. a. Using the average P/E multiple in Table 10.1, estimate Nike’s share price. b. What...

Q: Suppose that in May 2010, Nike had sales of $19

Suppose that in May 2010, Nike had sales of $19,176 million, EBITDA of $2,809 million, excess cash of $3,500 million, $437 million of debt, and 485.7 million shares outstanding. a. Using the average e...

Q: Suppose Rocky Shoes and Boots has earnings per share of $2

Suppose Rocky Shoes and Boots has earnings per share of $2.30 and EBITDA of $30.7 million. The firm also has 5.4 million shares outstanding and debt of $125 million (net of cash). You believe Deckers...