Use the following data for a home health firm to answer questions

September 12, 2019/in Questions Uploads /by Hannah Wangui

Question

Use the following data for a home health firm to answer questions. (Show work please and thank

you)

Net income after taxes $1,000,000

Depreciation 3,00,000

Interest 1,00,000

Capital Expenditures 400,000

Working capital expenditures 500,000

Long-term debt 1,000,000

Income taxes 400,000

1.What is the current value of free cash flow?

2.Using a 20 EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization), what is the value of the firm’s equity?

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debt

September 12, 2019/in Questions Uploads /by Hannah Wangui

Question

1. You have decided to advance refund $10,000,000 of outstanding debt that is callable in five

years. The interest rate on these bonds is 8%. You can issue new bonds at 6%. For every dollar of new debt issued, you will incur a 5% issuance cost. Interest payments on the present issue are $800,000 per year with no scheduled principal payments. How much new debt needs to be issued to realize defeasance of the present issue?

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Dublin Medical (DM)

September 12, 2019/in Questions Uploads /by Hannah Wangui

Question

Dublin Medical (DM), a large established corporation with no growth in its real earnings, is considering acquiring

100% of the shares of Arlington Corporation, a young firm with a high growth rate of earnings. The acquisitions analysis group at DM has produced the following table of relevant data:

Dublin Medical Arlington

Earnings per share $3.00 $2.00

Dividend per share $3.00 $.80

Number of shares 200 million 10 million

Stock price $30 $20

DM’s analysts estimate that investors currently expect growth of about 6% per year in Arlington’s earnings and dividends. They assume that with the improvements in management that DM could bring to Arlington, its growth rate would be 10% per year beginning one year from now with no additional investment outlays beyond those already expected.

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You purchased an MRI scanner two years ago for $2.0 million

September 12, 2019/in Questions Uploads /by Hannah Wangui

Question

1. You purchased an MRI scanner two years ago for $2.0 million. The MRI has a 5-year depreciable

life with no salvage value. If that same MRI now costs $3.0 million, what would be the difference between replacement cost depreciation and historical cost depreciation?