Question
A cosmetics company FacePro GmbH is considering buying a direct competitor Cosmo GmbH. For this purpose, the CFO of FacePro evaluates the target company using
A cosmetics company FacePro GmbH is considering buying a direct competitor Cosmo GmbH. For this purpose, the CFO of FacePro evaluates the target company using four different valuation approaches. This resulted in the value of Cosmo GmbH, before adding a acquisition premium, ranging from $411 million using discounted cash flow analysis, $370 million using the relative comparable companies valuation method, and $288 million using the tangible book value method. A valuation based on a recent comparable transaction is $404 million. Management is now instructing the CFO not to value all methods equally. Here, the comparable transaction is expected to be weighted at 40%. The remaining methods should then be given the same weighting. CFO believes Cosmo GmbH's management and shareholders would be willing to sell for a 15 percent premium.
What is the value of Cosmo GmbH based on the weighted average?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started