Suppose Jan Ltd is acquiring Feb Ltd. Feb Ltd has assets with a book value of N$200 million and liabilities of N$80 million. The assets currently generate an annual after-tax free cash flow of N$22 million. This is expected to grow at a rate of 15% per annum for the next four years. Thereafter, the sustainable growth rate in cash flows is expected to be 5% per year. The firm's cost of capital is 12o/o. The liabilities are fairly valued.

Required:

(a) How much would Jan Ltd be prepared to pay for the equity of Feb Ltd? (15 marks)

(b) Explain briefly, any five reasons for a company undertaking a merger' (10 marks