Accounting cash flow? Harrison Ltd. is considering acquiringPugs International Inc. Pugs had cashflows of $15 million last year and has 2.5million shares outstanding which arecurrently selling at $29 per share. Thediscount rate for analysis has beencorrectly estimated at 14%.How much should Harrison be willing topay for Pugs in total and per share if thefirm is not expected to grow significantlyand management insists that acquisitionsbe justified by no more than ten years ofprojected cash flows?

Step 1:- Define Discounted Cash FlowThe discounted cash flow (DCF) is a valuation approach that…

Answered: Harrison Ltd. is considering acquiring…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Thermo Fisher (“Fisher”) is considering an acquisition of Life Technologies (“Life Tech”). Life Tech shares currently trade at $60.75 per share with 179.3 million shares outstanding. Fisher shares currently trade at $40.50 per share with 200 million shares 2 | P a g e outstanding. The current net earnings of Fisher and Life Tech are $440.00 and $322.74 million, respectively. The current net earnings are expected to remain unchanged following the acquisition. It is also estimated that the synergy from acquisition will yield an additional $50 million of annual net earnings to the new company. Marginal tax rate remains unchanged at 35%. Fisher offers $79.80 for each Life Tech share. Assume that Fisher decides to offer 0.8 Fisher share plus remaining in cash for each Life Tech share. The cash will be financed by borrowing from an investment bank at the annual interest rate 5% over 10 years. What is the net earning per shares (EPS) of the combined firm following deal completion? Compared…

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