Can you please help me, I've been sitting for hours and I'm really desperate. Who gains and who loses from the following
Posted: Tue Nov 16, 2021 8:21 am
Can you please help me, I've been sitting for hours and I'm
really desperate.
Who gains and who loses from the following manoeuvres?
Illustrate your arguments by showing how the balance sheets might
change in each scenario (Note: if the information available is
insufficient, make reasonable assumptions)
Mini Case 29 Assume the following facts for Info Systems Inc.: Book value balance sheet Net working capital $20 m Bonds outstanding $50 m Fixed assets $80 m Equity $50 m Total assets $100 m Total Value $100 m Market value balance sheet Net working capital $20 m Bonds outstanding $25 m Fixed assets $10 m Equity $5 m Total assets $30 m Total Value $30 m Who gains and who loses from the following manoeuvres? illustrate your arguments by showing how the balance sheets might change in each scenario (Note: if the information available is insufficient, make reasonable assumptions). a. Info Systems halts operations, sells its fixed assets, and convert net working capital into $20 million cash. Unfortunately, the fixed assets fetch only $6 million on the secondhand market. The $26 million is invested in Treasury Bills. b. Info Systems encounters an acceptable investment opportunity, NPV = $0, requiring an investment of $10 million. The firm borrows to finance the project. The new debt has the same security, seniority, etc. as the old. c. Suppose that the new project has NPV = $2 million and is financed by an issue of preferred stock. d. Info Systems scrapes up $5 million in cash and pays a cash dividend. e. The lenders agree to extend the maturity of their loan from one year to two in order to give Info Systems a chance to recover.
really desperate.
Who gains and who loses from the following manoeuvres?
Illustrate your arguments by showing how the balance sheets might
change in each scenario (Note: if the information available is
insufficient, make reasonable assumptions)
Mini Case 29 Assume the following facts for Info Systems Inc.: Book value balance sheet Net working capital $20 m Bonds outstanding $50 m Fixed assets $80 m Equity $50 m Total assets $100 m Total Value $100 m Market value balance sheet Net working capital $20 m Bonds outstanding $25 m Fixed assets $10 m Equity $5 m Total assets $30 m Total Value $30 m Who gains and who loses from the following manoeuvres? illustrate your arguments by showing how the balance sheets might change in each scenario (Note: if the information available is insufficient, make reasonable assumptions). a. Info Systems halts operations, sells its fixed assets, and convert net working capital into $20 million cash. Unfortunately, the fixed assets fetch only $6 million on the secondhand market. The $26 million is invested in Treasury Bills. b. Info Systems encounters an acceptable investment opportunity, NPV = $0, requiring an investment of $10 million. The firm borrows to finance the project. The new debt has the same security, seniority, etc. as the old. c. Suppose that the new project has NPV = $2 million and is financed by an issue of preferred stock. d. Info Systems scrapes up $5 million in cash and pays a cash dividend. e. The lenders agree to extend the maturity of their loan from one year to two in order to give Info Systems a chance to recover.