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Essay / Research Paper Abstract
This 9 page paper looks at a case study supplied by the student were Cooper are looking at acquiring Nicholson. The paper considers how Cooper may value Nicholson, who the shareholders and the way an offer may be made. The bibliography cites 2 sources.
Page Count:
9 pages (~225 words per page)
File: TS14_TEcoopernic.rtf
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Unformatted sample text from the term paper:
average cost of capital. To start this process we need to consider what the current weighted average cost of capital is. For this we will use the equation WACC =
[Rd(1-Tc)C/V)] + [Re (E/V)]. Here Rd is the pre tax interest rate on debt, Tc is the corporate tax rate, D is the market value of the debt, Re is
the rate of return and is the market value of the ordinary shares. Note in this we are using the equation given by the student and the market value as
opposed to the internal equity level. We can also argue that there is no single definitive level that the company can afford to pay as not guidelines have been given.
However, looking at the assessments we can make some estimates. The first stage is the calculate the pre tax interest rate on debt. Looking at the accounts we need
to find the interest paid in the latest set of accounts and the level of long term debt. This leads us to the following. Interest paid 3 Debt
34 Interest rate 8.82% Next we need to look at the cooperate tax rate, as we are not given this, looking at the taxes paid against the net income before
taxes. Tax paid 4 Net income before tax 11 Tax rate 36.36% Next we need to work out the total value of the company; this includes the market value
of the ordinary shares, debt and preferred shares. The market value of the ordinary shares is the market price multiplied by the number of share outstanding, the debt is the
total debt and the preference share value we will take from the balance sheet as we do not have any indication of the tradable value of these shares.
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