Taking into account the mean takeover premium on recent comparable takeovers, what would be the estimate of the fair acquisition price of High Tech based on the comparable company approach?

Kinetic Corporation is considering acquiring High Tech Systems. Jim Smith, the vice president of nance at Kinetic, has been assigned the task of estimating a fair acquisition price for High Tech. Smith is aware of several approaches that could be used for this purpose. He plans to estimate the acquisition price based on each of these approaches, and has collected or estimated the necessary nancial data. High Tech has 10 million shares of common stock outstanding and no debt. Smith has estimated that the post-merger free cash ows from High Tech, in millions of dollars, would be 15, 17, 20, and 23 at the end of the following four years. After Year 4, he projects the free cash ow to grow at a constant rate of 6.5 percent a year. He determines that the appropriate rate for discounting these estimated cash ows is 11 percent. He also estimates that after four years High Tech would be worth 23 times its free cash ow at the end of the fourth year. Smith has determined that three companiesAlpha, Neutron, and Technoare comparable to High Tech. He has also identied three recent takeover transactionsQuadrant, ProTech, and Automatorthat are similar to the takeover of High Tech under consideration. He believes that price-to-earnings, price-to-sales, and price-to-book value per share of these companies could be used to estimate the value of High Tech. The relevant data for the three comparable companies and for High Tech are as follows:

Valuation Variables	Alpha	Neutron	Techno	High Tech
Current stock price ($)	44.00	23.00	51.00	31.00
Earnings/share ($)	3.01	1.68	2.52	1.98
Sales/share ($)	20.16	14.22	18.15	17.23
Book value/share ($)	15.16	7.18	11.15	10.02

The relevant data for the three recently acquired companies are given below:

Valuation Variables	Quadrant	ProTech	Automator
Stock price pre-takeover ($)	24.90	43.20	29.00
Acquisition stock price ($)	28.00	52.00	34.50
Earnings/share ($)	1.40	2.10	2.35
Sales/share ($)	10.58	20.41	15.93
Book value/share ($)	8.29	10.14	9.17