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ABYZ (B)

ABYZ (B). XYZ Xenogenic Yellow Zymogen. Agreement signed €80,000. ABC All Belgian Cy. Price/share € 12.50 Cash € 50,000 # shares 10,000 EPS 0.90 Beta 1.40. Cash paid out as dividend. Earnings 8,500 Beta 0.70. Corporate tax rate = 40%. ABYZ All Belgian Yellow Zymogen.

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ABYZ (B)

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  1. ABYZ (B) XYZXenogenic Yellow Zymogen Agreement signed €80,000 ABCAll Belgian Cy Price/share € 12.50 Cash € 50,000 # shares 10,000 EPS 0.90 Beta 1.40 Cash paid out as dividend Earnings 8,500 Beta 0.70 Corporate tax rate = 40% ABYZAll Belgian Yellow Zymogen Riskfree rate: 5% Exp.return on mkt portfolio: 10%

  2. ABC EBIT 9,000 Net income 5,400 WACC (= 5+5*1.4) 12% Mkt Value (5,400/0.12) 45,000 /# shares 10,000 Price per share 4.50 XYZ EBIT 8,500 Net income 5,100 WACC (=5+5*0.7) 8.50% Mkt Value 5,100/0.135 60,000 Valuing the companies NPV = 60,000 - 80,000 = - 20,000 NPV/share = -2€ Price per share after announcement = € 2.50

  3. Comparing various financing strategies

  4. Weighted Average Cost of Capital

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