Mercury Inc. Finance case.

How would you analyze the effect of possible synergies or other sources of value not reflected in Liedtke base case assumptions. Quantify their effects on your valuation.

DCF Analysis of an Aquistition: Base Case ($000) Mercury Athletics Net Sales Cost of Sales Gross Profit SGA Expenses Operating Income Taxes Net Income Plus: Depreciation CF from operations Less: change in NWC Less: capital expenditures Total Free Cash Flow Terminal Value NPV NPV total Acquisition Value of Company PV of FCF PV of terminal value Total Acquisition Value Multiple Analysis Acquisition value/estimate 1995 NI Acquisition value/1995 Op. Income Aquistition Value/FCF $ $ $ $ $ $ $ $ $ $ $ $ 2007 479,329 423,837 55,492 8,487 47,005 18,802 28,203 9,587 37,790 4,567 11,983 21,240 $18,470 $ $ $ 82,462 154,235 236,698 2.9 1.8 3.9 $ $ $ $ $ $ $ $ $ $ $ $ 2008 489,028 427,333 61,695 8,659 53,036 21,214 31,822 9,781 41,603 2,649 12,226 26,728 $20,210 $ $ $ $ $ $ $ $ $ $ $ $ 2009 532,137 465,110 67,027 9,422 57,605 23,042 34,563 10,643 45,206 9,805 13,303 22,098 $14,530 $ $ $ $ $ $ $ $ $ $ $ $ 2010 570,319 498,535 71,784 10,098 61,686 24,675 37,011 11,406 48,417 8,687 14,258 25,472 $ $ $ $ $ $ $ $ $ $ $ $ $ $14,564 $ $ 2011 597,717 522,522 75,195 10,583 64,612 25,845 38,767 11,954 50,721 6,233 14,943 29,545 $ 310,223 14,688 82,461 31,022 Assumptions Discount rate (cost of capital): Assumptions regarding projections, 1995 through 1999: Revenue growth (per year): Gross Profit (percent of revenue): SGA Expenses (percent of revenue): Capital Expenditures equal to depreciation Tax Rate: 15% 10% 55% 35% 38% Working Capital, depreciation, and capital expenditures grow at same rate as revenues Assumptions regarding terminal value (calculated with perpetual growth model) Revenue growth: CF generated based on 1999 margins and ratios 5%