Favorite Food Systems Inc. Favorite Food Systems Inc. which was founded by John Favorite in 1994, is a West Coast chain with current annual sales of approximately $75 million. In 2003, the company went public. (The Favorite family now controls about 57 percent of the common stock.)
Favorite Food Systems Inc. Favorite Food Systems Inc. which was founded by John Favorite in 1994, is a West Coast chain with current annual sales of approximately $75 million. In 2003, the company went public. (The Favorite family now controls about 57 percent of the common stock.)
Favorite Food Systems Inc. Favorite Food Systems Inc. which was founded by John Favorite in 1994, is a West Coast chain with current annual sales of approximately $75 million. In 2003, the company went public. (The Favorite family now controls about 57 percent of the common stock.)
Hi. I need help with the following question please.
One company that the analysis indicated as potentially suitable for acquisition by Admiral is Favorite Food Systems Inc. Favorite Food Systems Inc. which was founded by John Favorite in 1994, is a West Coast chain with current annual sales of approximately $75 million. In 2003, the company went public. (The Favorite family now controls about 57 percent of the common stock.)
1. The merger will generate $1.0 million in after tax earnings each year from synergies. Calculate the free cash flow from the synergies for 5 years, assuming $100,000 of depreciation for each year.
2. Develop the terminal year value of the synergies based on the fifth year of the cash flows. Assume the growth rate of the synergistic cash flows after the terminal year is 1.0%
3. Calculate the Admiral Foods post-merger income statement and earnings per share, assuming an exchange ratio of 0.45.
Transcribed Image Text:Favorite Food Systems, Inc. Balance Sheet (in Millions of Dollars)
Current liabilities
Long-term debt
Common equity
Current assets
Fixed assets, net
Total assets
$10.6
12.1
$22.7
Favorite Food Systems, Inc. Income Statement (in Millions of Dollars)
Sales
Less: Expenses, excluding depreciation
Less: Depreciation
Earnings after taxes
Earnings before interest and taxes
Less: Interest
Earnings before taxes
Less: Taxes (40%)
Dividends per share
Common stock (price per share)
(2,000,000 shares)
Total liabilities and equity
Additional Information
Admiral Foods
Corporation
$2.50
$50
$6.5
2.2
14.0
$22.7
$75.2
65.4
1.4
$ 8.4
0.4
$8.0
3.2
$ 4.8
Favorite Food
Systems
$ 0.60
$15
Transcribed Image Text:Admiral Foods Corporation Balance Sheet (in Millions of Dollars)
$225
Current liabilities
307
Long-term debt
Common equity (10,000,000 shares)
Total liabilities and equity
Current assets
Fixed assets, net
Total assets
$532
Admiral Foods Corporation Income Statement (in Millions of Dollars)
Sales
Less: Expenses, excluding depreciation
Less: Depreciation
Earnings before interest and taxes
Less: Interest
Earnings before taxes
Less: Taxes (40%)
Earnings after taxes
$101
106
325
$532
$1,261.0
1,118.2
36.0
$106.8
12.8
$94.0
37.6
$ 56.4
Definition Definition Cash that is left over after a company has paid for its operating and capital expenses. Unlike net income or earnings, free cash flow excludes non-cash expenses of the income statement and includes the expenditures on equipment and assets. Free cash flow also helps potential shareholders to evaluate how quickly the company can pay interest and dividends.
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