Financial Corporation wants to acquire Great Western Inc. Financial has estimated the enterprise value of Great Western at $104 million. The market value of Great Western’s long- term debt is $15 million, and cash balances in excess of the firm’s normal working capital requirements are $3 million. Financial estimates the present value of certain licenses that Great Western is not currently using to be $4 million. Great Western is the defendant in several outstanding lawsuits. Financial Corporation’s legal department estimates the potential future cost of this litigation to be $3 million, with an estimated present value of $2.5 million. Great Western has 2 million common shares outstanding. What is the value of Great Western per common share?
Financial Corporation wants to acquire Great Western Inc. Financial has estimated the
enterprise value of Great Western at $104 million. The market value of Great Western’s long-
term debt is $15 million, and cash balances in excess of the firm’s normal working capital
requirements are $3 million. Financial estimates the present value of certain licenses that Great
Western is not currently using to be $4 million. Great Western is the defendant in several
outstanding lawsuits. Financial Corporation’s legal department estimates the potential future
cost of this litigation to be $3 million, with an estimated present value of $2.5 million. Great
Western has 2 million common shares outstanding. What is the value of Great Western per
common share?
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