2 CheatSkeet International sold this year 50 million ewam solutions-units. The company has a fixed cost of S 5,000,000,000 and variable contribution margin of $25 per unit. Company sales are The company expected to grow at 50% annually for has income tax rate of 40% and WACC of 16%. s and st a). How many units should the company sell to breakeven? b). How much time will it take to reach breakeven? 7c). What is the company's value now? For simplicity, assume no carryforward of tax credit on losses. GeadyPublishers want to acquire CheatSheet International. Thcy believe that after their management the variable contribution margin will be S27 per unit. In addition, the acquirer wants to usc tax crodit on CheatSheet International losses. 10 d). What is the total valuc of syncrgy if GadyPubiishers acquire CheatSheer Internarional? What premium would you recommend to pay for this acquisition? 12 13 50,000,000 Units 50% 15 Current Salcs 16 Salcs Initial Growth 17 Period of initial growth 18 Salcs Steady Growth 19 Variable Contribution Margin 20 Fixed Cost 21 Tax Rate 22 WACC 23 24 a). How man 25 Breakeven sales 26 27 b). How much time will it take to reach breakeven? 28 Time to reach breakeven 29 0c). What 5 years 5% S25 S 5,000,000,000 40% 16% Score Maximum Score y units should the company sell to b is the company's value now? For s implicity, assume no carryforward of tax credit on losses. 32 Time 33 Pretax Cash Flow 34 After-tax Cash Flow 35 Terminal value 22 WACC 16% Maximum Score 24 a). How many units should the company sell to breakeven? 25 Breakeven sales 26 27 b). How much time will it take to reach breakeven? 28 Time to reach breakeven 29 30 c). What is the company's value now? For simplicity, assume no carryforward of tax credit on losses. 32 Time 33 Pretax Cash Flow 34 After-tax Cash Flow 35 Terminal valuc 36 Current Value 37 3 d). What is the total value of synergy if GeadyPublishers uoquire CheatSheet International? What premium would you recommend to pay for this acquisition? 39 40 New Contribution Margin 42 Time 43 Pretax Cash Flow 44 After-tax Cash Flow 5 Terminal value 46 Potential Tax Savings, if acquired 47 FCF 48 New value 49 Value of synergy 50 Premium to pay... 52 53