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Swatch, Inc. is thinking of acquiring Timex, Inc., and Swatch is attempting to determine the highest price per share it should be willing to pay
Swatch, Inc. is thinking of acquiring Timex, Inc., and Swatch is attempting to determine the highest price per share it should be willing to pay for Timex. Swatch expects that in the next 3 years, the FCF will be as shown in the table below. After that the FCF is expected to grow at an annual rate of 5%, forever. Timex does not have any cash. It has $50 million in debt and 10 million outstanding shares. Timex's WACC is 10%. 1. What is the continuation value at the end of year 3 ? million dollars (rounded to one digit after the decimal point). 2. What is the most Swatch, Inc. should be willing to pay (today) pler share for Timex, Inc.? dollars (rounded to one digit after the decimal point)
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