Riskfree rate 0.02 Market rate 0.15

1. In 2020, Analog Devices acquired Maxim Integrated for $21 billion. Use the Supernormal then Constant Growth Model and the information below to find Maxims value. Use the supernormal growth rate to find the free cash flows for t+1 and t+2, and use the constant growth rate to find the total cash flow for t+3.

Beta 0.80

Sales, Year t $2,632,529

Operating income 945,700

EBT 929,736

Taxes 102,475

Capex 64,848

Supernormal g 0.074

Constant g 0.053

2. In 2020, AON acquired Willis Towers Watson for $30 billion. Use the Supernormal then Zero Growth Model to determine whether AON over or underpaid for WTW. Forecast the free cash flows for t+1 and t+2, and the total cash flows for t+3. Note that the supernormal growth rate applies for t+1, t+2, and t+3.

Beta 0.95

Sales $9,352

Operating income 1,183

EBT 1,338

Taxes 318

Capex 69

Supernormal g 0.05