IntroIt is December 2022. You work as a financial analystfor Merck & Co. and are tasked with the due diligence onthe proposed acquisition of a biotech startup. Youestimated the following cash flows for the startup:Year20232024202520262027After 2027, cash flows are expected to grow by 3% peryear. Based on the riskiness of your industry, you thinkthat your weighted average cost of capital is 16%.SubmitThe biotech firm has 5 million shares and bonds worth$120 million outstanding.0+ decimalsPart 1What is the terminal value, i.e., the present value of allfree cash flows from 2028 to infinity expressed in 2027-dollars (in $ million)?SubmitExpected free cash flow($ million)(end of year)65.50+ decimals98.25127.73153.27168.6Part 2What is the total value of the company (in $ million)?Submit0+ decimalsPart 3What is the value per share of common stock (in $)?

Given: Particulars Expected free cash flows 2023 Cash flows $65.50 2024 Cash flows $98.25…

It is December 2022. You work as a financial analyst for Merck & Co. and are tasked with the due diligence on the proposed acquisition of a biotech startup. You estimated the following cash flows for the startup: Year 2023 2024 2025 2026 2027 Expected free cash flow ($ million) (end of year) 65.5 98.25 127.73 153.27 168.6 After 2027, cash flows are expected to grow by 3% per year. Based on the riskiness of your industry, you think

It is December 2022. You work as a financial analyst for Merck & Co. and are tasked with the due diligence on the proposed acquisition of a biotech startup. You estimated the following cash flows for the startup: Year 2023 2024 2025 2026 2027 Expected free cash flow ($ million) (end of year) 65.5 98.25 127.73 153.27 168.6 After 2027, cash flows are expected to grow by 3% per year. Based on the riskiness of your industry, you think

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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