Sales are booming so they want to expand by buying a competitor who is looking to retire
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Question:
Sales are booming so they want to expand by buying a competitor who is looking to retire called Z Corp. They will do this by using debt - a combination of bank debt and a private debt offering at an average rate of 8%. The EBIT for the new firm is 200k and the interest cost to purchase is 100k.
A. What is the DFL of Z Corp?
B. How can the DFL attributed to W Corp. be lowered if they buy Z Corp?
D. C. What will most likely happen W Corp if sales of Z Corp drop by half, in regards to DFL.
Related Book For
Introduction to Finance Markets Investments and Financial Management
ISBN: 978-1118492673
15th edition
Authors: Melicher Ronald, Norton Edgar
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