Mergers & Acquisitions and other Restructuring Activites (Donald M. DePamphilis)

Chapter 9 - Discussion Question #1

((The case study is in the textbook, please refer there))

Note the enterprise and equity valuations for Life Technology is in the Excel spreadsheet model entitled Target Valuation Model on the companion website accompaying this book. View this as the base case. The CEO Greg Lucier ask his cheif financial officer (CFO) to dtermine the impact of plausible assumption changes on the firm's valuation. The CFO asks you as a financial analyst to estimate the impact of a change in the firm's revenue growth rate and cost of sales as a percent of sales. On the Target Assumptions Worksheet, make the following changes note their impact on Life Tech's enterprise and equity values on the Valuation Worksheet:

a. Increase the sales growth rate in 2014 by 2 percentage points.

b. Retaining the assumption change made in (a), decrease the cost of sales as a percent of sales by 2 percentage point in 2014.