Ulysses Inc., a publicly traded toy manufacturing company, is considering investing in a 5-year joint venture...
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Ulysses Inc., a publicly traded toy manufacturing company, is considering investing in a 5-year joint venture with Lowie Inc, a movie company, to produce animated movies. You have been provided with the following information on the cost of equity and capital of the two companies: Cost of equity Cost of capital 7.50% The following are the projected cash flows for Ulysses' share of the joint venture: Time period (years) Ulysses Inc. Lowie Inc. 9% 12% 10% Revenues - COGS (includes depreciation) Operating income - Taxes 1 2 3 4 $100 $110 $125 $140 $40 $44 $60 $66 $75 $84 $96 $18 $20 $23 $25 $29 $42 $46 $53 $59 $67 $0 $0 $0 $0 $0 $5 $5 $5 $5 $5 -$80 $37 $41 $48 $54 $62 Estimate the value of the joint venture to Ulysses. (Provide your rationale for the discount rate that you use) After-tax operating income - (Cap ex - Depreciation) - Change in working capital Cash flow 0 $80 5 $160 $50 $56 $64 Ulysses Inc., a publicly traded toy manufacturing company, is considering investing in a 5-year joint venture with Lowie Inc, a movie company, to produce animated movies. You have been provided with the following information on the cost of equity and capital of the two companies: Cost of equity Cost of capital 7.50% The following are the projected cash flows for Ulysses' share of the joint venture: Time period (years) Ulysses Inc. Lowie Inc. 9% 12% 10% Revenues - COGS (includes depreciation) Operating income - Taxes 1 2 3 4 $100 $110 $125 $140 $40 $44 $60 $66 $75 $84 $96 $18 $20 $23 $25 $29 $42 $46 $53 $59 $67 $0 $0 $0 $0 $0 $5 $5 $5 $5 $5 -$80 $37 $41 $48 $54 $62 Estimate the value of the joint venture to Ulysses. (Provide your rationale for the discount rate that you use) After-tax operating income - (Cap ex - Depreciation) - Change in working capital Cash flow 0 $80 5 $160 $50 $56 $64
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Related Book For
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
Posted Date:
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