USA Accounting Case Problem - Help Needed Please

[nex2022]

Problem:

Real estate (Y ltd) company is interested in purchasing a Steel Company (X ltd)

- Asking Price of X ltd $ 2.5 Million
- Y ltd Operating Income is $1.0 Million
- By combining operations of X Ltd, Y ltd will save:
- $ 75,000 in Admin
- $ 75,000 in Salaries (Overpaid X Ltd managers)
- $ 15,000 in Storage (X ltd storage not needed as Y Ltd has excess room)
- Y Ltd uses approx 5 Million Ft of Steel / Year, in 2015 it is estimated that 10 Million Ft required (within capacity)
- Purchase price evaluation (Use WACC of 9% and 5 years)
- Income Statement for X Ltd is as Follows:

Ft of Steel Producted: 14.75 Million
Ft of Steel Sold: 13.5 Million
Avg Selling Price/Ft: $0.32
Sales: $4,252,500
DL: 1,371,750
DM: 1,888,000
Fixed MOH(includes Storage): 780,000
Marketing/Freight/Customer Service: 315,000
Admin: 300,000


Required:
- Break-even of X Ltd
- Transfer Price using the market price
- Is purchase Price of 2.5 Million reasonable? Discounted Cash flow analysis

 

[kirby]

How is having someone do your work for you going to help you to learn?

 

[nex2022]

Not having someone do my work for me? its not an assignment. Its a mock exam that I have but no answers! I need someone to answer so I can compare my numbers. If you can help I can post what I have answered so far.

 

[kirby]

Good that it is a mock exam as that will not affect your grade. So best to try this on your own and then compare to the solution the prof will give.

 

[nex2022]

Its not a class, i got this from an external source but has no answer with it. Can anyone help?

 

[smallbushelp]

Sorry pal, but that's just too much to ask in a forum like this.

 

[kirby]

I mean really, nex2022, there MUST be something better to do with your time than solving random break-even problems! Or are you stranded on some desert island and an old accounting book washed ashore?