5 30,450 Question 2 (30 marks) (No word limit) Your company (Domani Corporation) is considering taking over a company called Ciotala Corporation. The latest financials and projections of Ciotala Corporation for the next 5 years are given below: Latest Year Forecast 2 4 Sales 0123 36.351 30.155 28,345 29,982 2. Cost of Goods Sold 22.99 21,678 17,560 16,459 15,631 3 Other Costs 8,025 6797 5,078 4,678 4.987 4. EBITDA (1-2-3) 9.219 7,576 7,517 7,208 9,364 5. Depreciation and Amortization 5.678 5.250 5,670 5,908 6,107 6 EBIT (pretax profit) (4-5) 3:541 1,847 1,300 7. Tax at 35% 695 6-46 455 1.140 8. Profit after Tax (6-7) 2302 1.291 1.200 845 2,117 14987 5,134 10.329 5.908 LS 3.257 4421 1.547 2,874 754 -54 -342 -245 127 235 9 Change in Working Capita 10. Investment (change in gross PP&E) 6547 7345 5.398 5.470 6,420 6.598 a) Based on the given information estimate the going concern value of Ciotala Corporation. Assume that the forecast long-run growth rate beyond year 5 is 5%. The WACC for the firm is 10% (10 marks) b) Compute the value per share assuming that Ciotala has $10 million of debt and 1 million shares outstanding (5 marks) c) You also have the following information: Domani Ciotala Market Price $30 per share $15 per share Number of shares 2 million 1 million Compute the gain from acquisition (3 marks) d) If Domani makes a cash bid at $18.75 per share, compute the cost of cash acquisition (3 marks) e) If Domani makes a stock offer to Ciotala, giving 1 new share of the merged firm for every four shares held by Ciotala shareholders, what is the cost of acquisition? (4 marks) f) Which payment mode should the management choose to maximise the NPV of the acquisition