The private equity firm Clarence Partners is looking at a leveraged buyout opportunity on the Longo Trattoria restaurant chain. Longo today (Year O) has a
capital structure of 75% equity, 25% debt. Its free cash flow last year (FCFO) was
$1 Million and it is expected to grow at constant rate of 8% per year. All its assets
are operating assets. Its WACC equals 14%. If Clarence invests in the deal (it
would acquire 100% of the company), it plans to exit at the end of Year 5, at
which point Longo's capital structure will be 90% equity and only 10% debt, and
its enterprise value (EV) will be estimated at 20 times its FCF in Year 5 (FCF5). All
interim cash flows will be used to pay down debt. Clarence has a minimum 35%
IRR hurdle rate.
1. What is Longo's value of equity today?
2. What will be Longo's value of equity at the end of Year 5?
3. How much equity should Clarence invest today if it is to meet exactly its
hurdle rate?
4. How much debt should Clarence contract, in addition to its equity
investment, in order to close the deal with Longo today?

The following accounts appeared in recent financial statements of delta air lines. identify each account as either a balance sheet account or an income statement account. for each balance sheet account, identify it as an asset, a liability, or stockholders' equity. for each income statement account, identify it as a revenue or an expense. item financial statement type of account accounts payable balance sheet advanced payments for equipment balance sheet air traffic liability balance sheet aircraft fuel (expense) income statement aircraft maintenance (expense) income statement aircraft rent (expense) income statement cargo revenue income statement cash balance sheet contract carrier arrangements (expense) income statement flight equipment balance sheet frequent flyer (obligations) balance sheet fuel inventory balance sheet landing fees (expense) income statement parts and supplies inventories balance sheet passenger commissions (expense) income statement passenger revenue income statement prepaid expenses income statement taxes payable balance sheet

The uno company was formed on january 2, year 1, to sell a single product. over a 2-year period, uno’s acquisition costs have increased steadily. physical quantities held in inventory were equal to 3 months’ sales at december 31, year 1, and zero at december 31, year 2. assuming the periodic inventory system, the inventory cost method which reports the highest amount for each of the following is inventory december 31, year 1/ cost of sales year 2 a: lifo fifo b: lifo lifo c: fifo fifo d: fifo lifo

Carey company is borrowing $225,000 for one year at 9.5 percent from second intrastate bank. the bank requires a 15 percent compensating balance. the principal refers to funds the firm can effectively utilize (amount borrowed − compensating balance). a. what is the effective rate of interest? (use a 360-day year. input your answer as a percent rounded to 2 decimal places.) b. what would the effective rate be if carey were required to make 12 equal monthly payments to retire the loan?