Suppose that Latin Inc.wants to acquire Despacito Inc. The objective of this question estimate the value of synergies of the merge. Both companies are expected to have stable growth of 2% staring this year (2021).The weighted average cost of capital(WACC) for Latin is10% and for Despacito 17%.End of last year (2020)free cash flows for Latin are $10 million and for Despacito $15 million. Assume that today is January 1 2021.

Answer the following questions by selecting the4 best possible answers,that is the answers that better approximate to your solutions.

1) What is the combined value of both companies working independently( Value of Despacito + Value of Latin)? Select A,B or C

2) What is the value of the Combined company under the assumptions below?Select D,EorF

-WACC for the Combined firmis the weighted average WACC of Latin and Despacito, with the weights calculated based on the value of the firms.

- Free cash flows for the combined company are the sum of both companies cashflows. - The combined company is expected to have stable growth of 4% staring this year (2021)

3) Under assumptions of question 2,suppose that Despacito has 1 million shares outstanding what are the maximum price per share that Latin will be willing to pay for Despacito? Select G,H or I

A)The Value of Despacito + Value of Latin working independently is $284.5 million

B)The Value of Despacito + Value of Latin working independently is $357 million

C)The Value of Despacito + Value of Latin working independently is $229.5 million

D) The value of the Combined company under question 2)assumptions is $411millions

E)The value of the Combined company under question 2)assumptions is$285.37 millions

F) The value of the Combined company under question 2) assumptions is $411 millions

G)The maximun price per share that Latin will be willing to pay for Despacito is $80.55

H)The maximun price per share that Latin will be willing to pay for Despacito is $53.55

I)The maximun price per share that Latin will be willing to pay for Despacito is $55.87