Corporate Finance

College of Business |worldwide.erau.eduAll rights are reserved. The material contained herein is the copyright property of Embry-Riddle Aeronautical University, Daytona Beach, Florida, 32114. No part of this material may be reproduced, stored in a retrieval system or transmitted in any form, electronic, mechanical, photocopying, recording or otherwise without the prior written consent of the University.MGMT 332 Corporate Finance IModule 6: Return, Risk, and the Cost of CapitalProblem Set 6 – Return, Risk, and the Cost of Capital1. Argo Airlines is looking to buy Aerial Airlines. Your boss, the CFO, wants a quick and dirty valuation of Aerial. You choose to look at past transactions in the airline industry to get some numbers. You find the following from reported transactions for the average price paid:a. 17x the acquired firm’s earnings per share (EPS) b. 5.5x EBITDA c. 33.0% premium of share priceFor Aerial, you find out the following: a. EPS = $3.00 b. EBITDA = $755 million (debt value = $1,100 million) c. Stock Price = $41.25 (65 million shares outstanding)Using EPS, EBITDA, and premium over stock price, what should be Aerial’s prices per share? What is the average of the three?2. You have been asked to calculate the cost of equity for three firms – Eastern, Western, and Northern. You know the following:Firm Beta Cost of Debt Debt/AssetsEastern 1.80 3.3% 37% Western 1.45 3.8% 69% Northern 1.20 2.9% 40%You know the following:• 10-year Treasury yield = 1.10% • Market Premium = 5.5% • Average Tax Rate = 21%What are the expected returns on equity and WACCs for each of these firms?CONTINUES ON THE NEXT PAGEhttp://www.worldwide.erau.edu/Page 2 of 23. You have been asked to calculate the dividend discount model-based price per share for the three airlines shown above. You know the following for 2019:Firm Dividend Growth/yearEastern 3.05 3.1% Western 2.00 2.0% Northern 2.20 2.7%You already know their WACCs, so you can use them to present value the stream of dividends. Remember that the terminal value uses the perpetuity formula and that it automatically shows the value as of the beginning of the year when it is calculated!Module 6: Return, Risk, and the Cost of Capital

Struggling to find relevant content? Order a custom essay on
Corporate Finance
Let our experts save you the hassle
Order Now
Calculate the price
Make an order in advance and get the best price
Pages (550 words)
$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
Sign up, place your order, and leave the rest to our professional paper writers in less than 2 minutes.
step 1
Upload assignment instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
s
Get personalized services with GPA Fix
One writer for all your papers
You can select one writer for all your papers. This option enhances the consistency in the quality of your assignments. Select your preferred writer from the list of writers who have handledf your previous assignments
Same paper from different writers
Are you ordering the same assignment for a friend? You can get the same paper from different writers. The goal is to produce 100% unique and original papers
Copy of sources used
Our homework writers will provide you with copies of sources used on your request. Just add the option when plaing your order
What our partners say about us
We appreciate every review and are always looking for ways to grow. See what other students think about our do my paper service.
Human Resources Management (HRM)
great
Customer 452813, February 4th, 2024
Business and administrative studies
Perfect as always!
Customer 452909, April 15th, 2023
Human Resources Management (HRM)
Thank you.
Customer 452701, April 24th, 2023
Human Resources Management (HRM)
Thanks for your assistance.
Customer 452701, November 9th, 2022
Nursing
Great work! Thank you so much.
Customer 452707, July 15th, 2022
Other
great
Customer 452813, June 25th, 2022
Social Work and Human Services
Thank You, Don!!! :)
Customer 452587, November 9th, 2021
Other
Great job
Customer 452813, July 27th, 2023
Social Work and Human Services
Excellent! Done earlier than needed and with more sources than needed! Great work!
Customer 452485, August 22nd, 2021
Nursing
As usual, the writers do amazing work.
Customer 452707, October 1st, 2022
Nursing
Not all sources were " American sources" as directed
Customer 452615, September 16th, 2021
Other
AWESOME
Customer 452813, June 25th, 2022
OUR GIFT TO YOU
15% OFF your first order
Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.
Claim my 15% OFF Order in Chat

Good News ! We now help with PROCTORED EXAM. Chat with a support agent for more information