Question
Schooner Shipyards is contemplating an acquisition target. Schooner want to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value
Schooner Shipyards is contemplating an acquisition target. Schooner want to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent growth rate. The following table shows the projected free cash flows of the target.
________________________________________________________________________
Year 1 2 3 4 5
Free Cash Flow -800 -400 0 200 700
________________________________________________________________________
Answer the following three questions:
a. Estimate the targets maximum acquisition price.
Schooner Shipyards is contemplating an acquisition target. Schooner want to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent growth rate. The following table shows the projected free cash flows of the target.
________________________________________________________________________
Year 1 2 3 4 5
Free Cash Flow -800 -400 0 200 700
________________________________________________________________________
a. Estimate the targets maximum acquisition price.
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Understanding financial statements
Authors: Lyn M. Fraser, Aileen Ormiston
9th Edition
136086241, 978-0136086246
