Questions from Financial Management

Q: Explain how the market multiples method is used to determine the value

Explain how the market multiples method is used to determine the value of a target firm to a potential acquirer. Give several examples of this procedure.

Q: If you were conducting a merger analysis, would you give the

If you were conducting a merger analysis, would you give the multiples method or one of the DCF methods (that is, the APV or corporate valuation model) more weight in your decision? Explain.

Q: Southwestern Wear Inc. has the following balance sheet: /

Southwestern Wear Inc. has the following balance sheet: The trustee’s costs total $281,250, and the firm has no accrued taxes or wages. The debentures are subordinated only to the no...

Q: Explain how purchase accounting is implemented in a merger. Does the

Explain how purchase accounting is implemented in a merger. Does the accounting profession now require this method? How is any premium that the acquiring firm paid over the acquired firm’s book value...

Q: Acquisitions can have important tax consequences depending on: (a

Acquisitions can have important tax consequences depending on: (a) Whether the acquiring firm purchases the target’s stock or just its assets, (b) whether cash or stock is used for the payment, and...

Q: What are horizontal, vertical, congeneric, and conglomerate mergers?

What are horizontal, vertical, congeneric, and conglomerate mergers? Are the different types of mergers equally likely to pass muster with the Justice Department?

Q: The South Korean multinational manufacturing firm, Nam Sung Industries, is

The South Korean multinational manufacturing firm, Nam Sung Industries, is debating whether to invest in a 2-year project in the United States. The project’s expected dollar cash flows consist of an i...

Q: At today’s spot exchange rates 1 U.S. dollar can

At today’s spot exchange rates 1 U.S. dollar can be exchanged for 9 Mexican pesos or for 111.23 Japanese yen. You have pesos that you would like to exchange for yen. What is the cross rate between the...

Q: The nominal yield on 6-month T-bills is 7

The nominal yield on 6-month T-bills is 7%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market, 1 yen equals $0.009. If interest rate pa...

Q: Assume that interest rate parity holds. In both the spot market

Assume that interest rate parity holds. In both the spot market and the 90-day forward market, 1 Japanese yen equals 0.0086 dollar. In Japan, 90-day risk-free securities yield 4.6%. What is the yield...