●Or if the management knows that by declining the offer, they will be able to get a higher bid than $35, from another company. The management is not acting in the shareholders’ best interests if the purpose of fighting off the takeover is to act in their own self-interest. For instance, a purpose of fighting off a takeover is due to fear of losing their jobs. Since, after a takeover it is likely that a new management team may be brought in to replace the existing ones.
#3: Dahlia Industries had the following operating results for 2009: sales = $22,800; cost of goods sold = $16,050; depreciation expense = $4,050; interest expense = $1,830; dividends paid = $1,300. At the beginning of the year, net fixed assets were $13,650, current assets were $4,800, and current liabilities were $2,700. At the end of the year, net fixed asset $16,800, current assets were $5,930, and current liabilities were $3,150. The tax rate for 2009 was 34 percent. a.What is net income for 2009? Taxable Income = Total Revenue –Total Expenses = 22,800 - 16,050 - 4050 - 1830 = 870 Net Income = 870 –(0.34*870) = $574.20b.What is the operating cash flow for 2009? OCF = EBIT * (1- Tax rate) + Depreciation = (22,800 –16,050 –4050) * (1 –0.34) + 4050 = $5,832 c.What is the cash flow from assets for 2009? Is this possible? Explain. CFFA = OCF –NCS (Ending Net Fixed Assets –Beginning Net Fixed Assets + Depreciation) –Changes in NWOC (Ending NWOC –Beginning NWOC (excludes interest bearing liabilities)) = 5832 –(16,800 –13,650 + 4050) –[(5930 –3150) –(4800 –2700)] = 5832 –7200 –680 = –$2,048 Yes, it is possible. Cash flow from assets is the cash flow from generating assets and financing assets. A healthy firm would be expected to generate positive cash flow. However, if the firm is young and/or is investing heavily to promote growth, then a negative Cash Flow from the Firm's Assets may arise. d.If no new debt was issued during the year, what is the cash flow to creditors? What is the cash flow to stockholders? Explain and interpret the positive and negative signs of your answers in (a) through (d).
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