Home / Questions / You are considering a takeover of PMT Corporation a firm that has significantly underperfo...
You are considering a takeover of PMT Corporation, a firm that has significantly underperformed its peer group over the last five years and you wish to estimate the value of control. The data on PMT Corporation, the peer group, and the best managed firm in the group are given below.
|
PMT |
Peer Group |
Best |
Return on Assets (After-tax) |
8.00% |
12.00% |
18.00% |
Dividend Payout Ratio |
50.00% |
30.00% |
20.00% |
Debt Equity Ratio |
10.00% |
50.00% |
50.00% |
Interest Rate on Debt |
7.50% |
8.00% |
8.00% |
Beta |
Not Available |
1.3 |
1.3 |
PMT Corporation reported earnings per share of $2.50 in the most recent time period and is expected to reach stable growth in five years, after which the growth rate is expected to be 6% for all firms in this group. The beta during the stable growth period is expected to be 1 for all firms. There are 100 million shares outstanding and the treasury bond rate is 7% (the tax rate is 40% for all firms).
a. Value the equity in PMT Corporation, assuming that the current management continues in place.
b. Value the equity in PMT Corporation, assuming that it improves its performance to peer group levels.
c. Value the equity in PMT Corporation, assuming that it improves its performance to the level of the best managed firm in the group.
Jun 18 2020 View more View Less
Calculate oxidation number of: (3 Marks)(a) Cr in CrO7 2- (b) P in Na2HPO4 (c) S in H2SO4(II) Write the balanced equation for the reaction when:zinc sulphide reacts w...
May 15 2021Assigned topic: discussing and assessing the definition of politics as seen in the last slide of the lecture notes for Week 1 (posted on the Blackboard); this is the defi...
Mar 13 2020One of the approaches for the Southern Company to comply with the Clean Air Act is to adopt fuel-switching technology. Do you think this strategic flexibility would have ...
Apr 03 2020Marginal Analysis of given cost and revenue shedulesProblem 1Given the following total-revenue function: TR=9Q-Q(2) A)Derive the total, average, and marginal revenue sc...
Mar 18 2020(a) The open intervals on which f is increasing.(b) The open intervals on which f is decreasing.(c) The open intervals on which f is concave upward.(d) The open intervals...
Jul 06 2021Bond Valuation with Semiannual PaymentsRenfro Rentals has issued bonds that have a 11% coupon rate, payable semiannually. The bonds mature in 12 years, have a face value ...
Aug 06 2021What is the final concentration of oxygen in the following reaction if 2.00 moles of oxygen are present at the beginning of the reaction with excess nitrogen in a 10.00 L...
Aug 19 20211. Which type of production process—job shop, batch, repetitive, or continuous—is the primary mode of operation at Stickley Furniture? 2. Suppose that the company has ...
Apr 26 2020Should the firm seek to expand, contract, or change the emphasis of its selected target markets? If so, in which target markets, and how vigorously?
Jul 22 2021Find the particular antiderivative that satisfies the following conditions:
Jun 12 2021