3 based on the analysis in case exhibit 9 what is the

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3.Based on the analysis in case Exhibit 9, what is the anticipated CPK share price undereach scenario? How many shares will CPK be likely to repurchase under each scenario?What role does the tax deductibility of interest play in encouraging debt financing atCPK?4.What capital structure policy would you recommend for CPK?Case 35 Deluxe Corporation1.What are the risks associated with Deluxe’s business and strategy? What financingrequirements do you foresee for the firm in the coming years?2.What are the main objectives of the financial policy that Rajat Singh must recommend toDeluxe Corporation’s board of directors?3.Drawing on the financial ratios in case Exhibit 6, how much debt could Deluxe borrow ateach rating level? What capitalization ratios would result from the borrowings implied byeach rating category?4.Using Hudson Bancorp’s estimates of the costs of debt and equity in case Exhibit 8,which rating category has the lowest overall cost of funds? Do you agree with Hudson
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Bancorp’s view that equity investors are indifferent to the increases in financial riskacross the investment-grade debt categories?5.Is Deluxe’s current debt level appropriate? Why or why not?6.What should Singh recommend regarding:the target bond ratingthe level of flexibility or reservesthe mix of debt and equityCase 43 American Greetings1. The shares of American Greetings are currently trading at an EBITDA multiple that is at thebottom of its peer group.Do you think a 3.5 times multiple is appropriate for AmericanGreetings?If not, what multiple of EBITDA do you think is justified?What is the implied shareprice that corresponds to that multiple?2. Please model cash flows for American Greetings for fiscal years 2012 through 2015.Using amarginal tax rate of 40% and a market risk premium of 5%, what is your estimate of theappropriate discount rate for the free cash flow forecast? Based on a discounted cash flow model,what is your best estimate of the implied enterprise value of American Greetings and thecorresponding share price?3. What are the key drivers of value in your model?4. Do you recommend repurchasing shares?Case 45 JetBlue Airways1.What are the advantages and disadvantages of going public?2.What different approaches can be used to value JetBlue’s shares?3.Does the financial forecast in case Exhibit 13 seem reasonable? What are the keyassumptions? Is the length of the forecast period reasonable4.What discount rate is appropriate for the cash-flow forecast?5.What is your approach for terminal value?
6.At what price would you recommend that JetBlue offer its shares?Case 46 Rosetta Stone1.What are the advantages and disadvantages of Rosetta Stone going public?2.What is the process of IPO in the U.S.?3.What should be the cost of capital used in DCF valuation for Rosetta Stone?4.What do you think the current market price is for Rosetta Stone shares? Justify yourvaluation on a discounted-cash-flow basis and a market multiples basis.5.At what price would you recommend that Rosetta Stone shares be sold?
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Intermediate Financial Management
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Chapter 18 / Exercise 025
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