Closing Case Pg 489

1 ) What is the expected benefit of the company in one 12 months, with minus expansion? Could the company stockholders be better away with or without expansion? Why?

The expected ideals of the firm without development goes as followed

(. 3)(11, 500, 000)+(. 5)(17, 500, 000)+(. 2)(22, 5000, 000)=165, five-hundred, 000

The expected worth of the firm with development goes while followed:

(. 3)(13, 000, 000)+(. 5)(24, 000, 000)+(. 2)(28, 500, 000)=215, 1000, 000 (215, 000, 000)-(4, 500, 000(cost))=170, 000, 000

Would the business stockholders be better off with or without expansion? The stockholders will be better off with expansion since the value from the company would increase by 4, 5000, 000. While the cake model displays on page 467, the shareholders and bondholders received the vast majority of firm, for that reason higher figures in regards to the worth of the business would be inside their best interest.

installment payments on your What is the expected worth of the business debt in a single year, with and without the expansion?

Since there is a bond that may be outstanding that is 14 mil dollars as well as the expansion is being financed together with the equity which is 4. 5million dollars the business debt in one year with and without the expansion would be 18. five million.

a few. One year from now, how much value creation is expected from the growth? How much benefit is expected for stockholder? Bondholders?

(. 3)(11, 500, 000)+(. 5)(17, 500, 000)+(. 2)(22, 5000, 000)=165, five-hundred, 000

(. 3)(13, 000, 000)+(. 5)(24, 000, 000)+(. 2)(28, 500, 000)=215, 500, 000 (215, 000, 000)-(4, 500, 000(cost))=170, 000, 500

70, 000, 000-165, 5000, 000=4, 500, 000

The significance that is produced from expansion would be 4, 500, 000

The worthiness expected for the stockholders would be 4, 500, 500

4. In the event the company announces that it is certainly not expanding, so what do you think will happen to the price of the you possess? What will happen towards the price in the bonds in the event the company truly does expand?

I think if the organization announces that it can be not expanding then the rates of the a genuine would not change,...

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