The following information relates to Questions 15 below.

Kinetic Corporation is considering acquiring High Tech Systems. Jim Smith, the vice

president of finance 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 financial data.

High Tech has 10 million shares of common stock outstanding and no debt. Smith has

estimated that the post-merger free cash flows 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 flow to grow at a constant rate of 6.5 percent a year. He determines that the appropriate

rate for discounting these estimated cash flows is 11 percent. He also estimates that after four

years High Tech would be worth 23 times its free cash flow at the end of the fourth year.

Smith has determined that three companiesAlpha, Neutron, and Technoare comparable

to High Tech. He has also identified 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 Variable Quadrant ProTech Automator

Stock Price pre-takeover ($) 24.90 43.20 29.00

Acquisition Stoack Price ($) 28.00 52.00 34.50

Earnings/share ($) 1.40 2.10 2.35

While discussing his analysis with a colleague, Smith makes two comments. Smiths first

comment is: If there were a pre-announcement run-up in Quadrants price because of

speculation, the takeover premium should be computed based on the price prior to the runup.

His second comment is: Because the comparable transaction approach is based on the

acquisition price, the takeover premium is implicitly recognized in this approach.

1. )What is the present value per share of High Tech stock using the discounted cash flow

approach if the terminal value of High Tech is based on using the constant growth model

to determine terminal value?

2.) What is the value per share of High Tech stock using the discounted cash flow approach

if the terminal value of High Tech is based on using the cash flow multiple method to

determine terminal value?

3.) The average stock price of High Tech for the three relative valuation ratios (if it is traded

at the mean of the three valuations) is:

4.) 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?

5.) The fair acquisition price of High Tech using the comparable transaction approach is

Please show detailed work and explanation on how you get each answer please!