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Question: Kenneth Cole Productions (KCP) was acquired in


Kenneth Cole Productions (KCP) was acquired in 2012 for a purchase price of $15.25 per share. KCP has 18.5 million shares outstanding, $45 million in cash, and no debt at the time of the acquisition.
a. Given a weighted average cost of capital of 11%, and assuming no future growth, what level of annual free cash flow would justify this acquisition price?
b. If KCP’s current annual sales are $480 million, assuming no net capital expenditures or increases in net working capital, and a tax rate of 35%, what EBIT margin does your answer in part (a) require?



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> Consider the following two, completely separate, economies. The expected return and volatility of all stocks in both economies is the same. In the first economy, all stocks move together—in good times all prices rise together and in bad times they all fa

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> Using the data in Problem 20, calculate a. The expected overall payoff of each bank. b. The standard deviation of the overall payoff of each bank. Data from Problem 20: Consider two local banks. Bank A has 100 loans outstanding, each for $1 million, th

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> The following table shows the one-year return distribution of Startup, Inc. Calculate a. The expected return. b. The standard deviation of the return. Probability 40% 20% 20% 10% 10% Return – 100% -75% -50% -25% 1000%

> What if the last two and a half decades had been “normal”? Download the spreadsheet from containing the data for Figure 10.1. a. Calculate the arithmetic average return on the S&P 500 from 1926 to 1989. b. Assuming

> Using the data from Problem 17, repeat your analysis over the 1990s. a. Which asset was riskiest? b. Compare the standard deviations of the assets in the 1990s to their standard deviations in the Great Depression. Which had the greatest difference betwee

> Download the spreadsheet from containing the data for Figure 10.1. a. Compute the average return for each of the assets from 1929 to 1940 (The Great Depression). b. Compute the variance and standard deviation for each of the assets from 1929 to 1940. c.

> How does the relationship between the average return and the historical volatility of individual stocks differ from the relationship between the average return and the historical volatility of large, well-diversified portfolios?

> Compute the 95% confidence interval of the estimate of the average monthly return you calculated in Problem 13(a). Data from Problem 13: Using the same data as in Problem 12, compute the a. Average monthly return over this period. b. Monthly volatility

> Explain the difference between the average return you calculated in Problem 13(a) and the realized return you calculated in Problem 12. Are both numbers useful? If so, explain why. Data from Problem 13: Using the same data as in Problem 12, compute the

> Using the same data as in Problem 12, compute the a. Average monthly return over this period. b. Monthly volatility (or standard deviation) over this period. Data from Problem 12: Download the spreadsheet from that contains historical monthly prices an

> See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Use the data from the balance sheet and cash flow statement in 2012 to determine the following: a. How much cash did Mydeco have at the end of 2011? b. What were Mydeco&

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> Using the data in Table 10.2, a. What was the average dividend yield for the SP500 from 2002–2014? b. What was the volatility of the dividend yield? c. What was the average annual return of the SP500 from 2002–2014 exc

> The figure on page 351 shows the one-year return distribution for RCS stock. Calculate a. The expected return. b. The standard deviation of the return. 35 30 25 20 15 10 5 -25% -10% 0% 10% 25% Return Probability (%)

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> For the assumptions in part (a) of Problem 5, assuming a cost of capital of 12%, calculate the following: a. The break-even annual sales price decline. b. The break-even annual unit sales increase. Data from Problem 5: After looking at the projections

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2.99

See Answer