Question 3: Wild Corporation is in the process of acquiring Tamed Inc. Tamed Inc. has two divisions: food manufacturing and retail grocery. The current number of outstanding shares is 200. a) What do you recommend for the total value of the food division? What about the retail grocery division? b) The management of Tamed Inc. has informed us that the Cost of goods sold for the Retail Grocery division was abnormally high this year due to the temporary closure of one of the local suppliers. We expect a much lower Cost of goods sold for that division in the future. Given this information, what do you recommend for the total value of the food division? What about the retail grocery division? c) Wild Corporation is offering $92 per share. Given the information in part (b), would you recommend the shareholders of Tamed Inc. to accept the offer or decline it? Why? Statement of Comp. Income (Food Manufacturing Division) Sales 2,000 Cost of goods sold 700 Depreciation 300 EBIT 1,000 Interest paid 200 Taxable income 800 Taxes (4096) 320 Net Income 180 Statement of Comp. Income (Retail Grocery Division) Sales 2,500 Cost of goods sold 1,400 Depreciation 500 EBIT 600 Interest paid 100 Taxable income 500 Taxes (40%) 200 Net Income 300 Statement of Comp. Income (Consolidated Statement) Sales 4.500 Cost of goods sold 2100 Depreciation 800 EBIT 1.600 Interest paid 300 Taxable income 1.300 Taxes (4046) 520 Net Income 780 Companies Price to our ratio CA. Shop Co. Sunny Co. Raspberry Co. Pasta Inc. Shop With US Co. Peach Perfect Inc. Grocery Grocery Food Food Grocery Food 14 15 18.5 18 14.5 19 3 3.5 5 4.5 4 6 Question 3: Wild Corporation is in the process of acquiring Tamed Inc. Tamed Inc. has two divisions: food manufacturing and retail grocery. The current number of outstanding shares is 200. a) What do you recommend for the total value of the food division? What about the retail grocery division? b) The management of Tamed Inc. has informed us that the Cost of goods sold for the Retail Grocery division was abnormally high this year due to the temporary closure of one of the local suppliers. We expect a much lower Cost of goods sold for that division in the future. Given this information, what do you recommend for the total value of the food division? What about the retail grocery division? c) Wild Corporation is offering $92 per share. Given the information in part (b), would you recommend the shareholders of Tamed Inc. to accept the offer or decline it? Why? Statement of Comp. Income (Food Manufacturing Division) Sales 2,000 Cost of goods sold 700 Depreciation 300 EBIT 1,000 Interest paid 200 Taxable income 800 Taxes (4096) 320 Net Income 180 Statement of Comp. Income (Retail Grocery Division) Sales 2,500 Cost of goods sold 1,400 Depreciation 500 EBIT 600 Interest paid 100 Taxable income 500 Taxes (40%) 200 Net Income 300 Statement of Comp. Income (Consolidated Statement) Sales 4.500 Cost of goods sold 2100 Depreciation 800 EBIT 1.600 Interest paid 300 Taxable income 1.300 Taxes (4046) 520 Net Income 780 Companies Price to our ratio CA. Shop Co. Sunny Co. Raspberry Co. Pasta Inc. Shop With US Co. Peach Perfect Inc. Grocery Grocery Food Food Grocery Food 14 15 18.5 18 14.5 19 3 3.5 5 4.5 4 6
