(7 points) The following represents the target's accounting data you have estimated for the years 2018-2019. Assume that all of these numbers are end-of-year data (i.e. today is January 1st, 2018 and the revenues, etc. are at the end of 2018, 2019). In addition, you have the following information for the target and the acquiring firm. 2018 2019 Revenues $9,000,000 $13,000,000 Cost of Goods Sold $4.500.000 $8,000,000 Depreciation $1,000,000 $1,200,000 A&G $1.200.000 $900.000 Interest $750,000 $800.000 Retained Earnings S600.000 S800.000 Target Acquiring Firm Calculate the appropriate cash flows. BL = 1.8 Cap Structure: Debt-50% Calculate the appropriate discount rate for the Taxes = 30% Taxes = 34% acquiring firm based on the value of the target. Cap Structure: Debt = 30% Calculate the target firm value. What would be a # of Shares Outstanding = 800,000 Other Information reasonable offer (i.e. S/share) for the target. Current Price per Share = $18 T-bond rate = 6% Est. Future Growth Rate -8% Mkt Risk Premium = 5% (7 points) The following represents the target's accounting data you have estimated for the years 2018-2019. Assume that all of these numbers are end-of-year data (i.e. today is January 1st, 2018 and the revenues, etc. are at the end of 2018, 2019). In addition, you have the following information for the target and the acquiring firm. 2018 2019 Revenues $9,000,000 $13,000,000 Cost of Goods Sold $4.500.000 $8,000,000 Depreciation $1,000,000 $1,200,000 A&G $1.200.000 $900.000 Interest $750,000 $800.000 Retained Earnings S600.000 S800.000 Target Acquiring Firm Calculate the appropriate cash flows. BL = 1.8 Cap Structure: Debt-50% Calculate the appropriate discount rate for the Taxes = 30% Taxes = 34% acquiring firm based on the value of the target. Cap Structure: Debt = 30% Calculate the target firm value. What would be a # of Shares Outstanding = 800,000 Other Information reasonable offer (i.e. S/share) for the target. Current Price per Share = $18 T-bond rate = 6% Est. Future Growth Rate -8% Mkt Risk Premium = 5%
