One of your competitors is currently struggling financially. Their shareprice has dropped as a result and buying them would be cheaper. Acquiring them would also be interesting, because they cover a different geographical market. Assume that their current share price is €15 per share and they have 12 mil shares outstanding. They hold €40 mil in debt and have cash reserves of €1 mil. Based on these figures, what would be the cost of buying your competitor? Assume there are no additional fees or taxes, but the cost of taking over the company is solely determined by its value and would occur in year 0. Assume your FP&A department has forecast a target cash flow and projected growth rates as indicated in the Excel file. Use the Excel template to calculate the NPV of the investments. Assume your airline’s cost of capital (discount rate) is 9%. (Tipp: Group cash flows by inflows and outflows to simplify your calculations)
One of your competitors is currently struggling financially. Their shareprice has dropped as a result and buying them would be cheaper. Acquiring them would also be interesting, because they cover a different geographical market. Assume that their current share price is €15 per share and they have 12 mil shares outstanding. They hold €40 mil in debt and have cash reserves of €1 mil. Based on these figures, what would be the cost of buying your competitor? Assume there are no additional fees or taxes, but the cost of taking over the company is solely determined by its value and would occur in year 0. Assume your FP&A department has forecast a target cash flow and projected growth rates as indicated in the Excel file. Use the Excel template to calculate the NPV of the investments. Assume your airline’s cost of capital (discount rate) is 9%. (Tipp: Group cash flows by inflows and outflows to simplify your calculations)
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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Question
One of your competitors is currently struggling financially. Their shareprice has
dropped as a result and buying them would be cheaper. Acquiring them would also be
interesting, because they cover a different geographical market.
Assume that their current share price is €15 per share and they have 12 mil shares
outstanding. They hold €40 mil in debt and have cash reserves of €1 mil. Based on
these figures, what would be the cost of buying your competitor? Assume there are no
additional fees or taxes, but the cost of taking over the company is solely determined by
its value and would occur in year 0.
Assume your FP&A department has
rates as indicated in the Excel file.
Use the Excel template to calculate the NPV of the investments. Assume your airline’s
cost of capital (discount rate) is 9%. (Tipp: Group cash flows by inflows and outflows to
simplify your calculations)
cost of capital (discount rate) is 9%. (Tipp: Group cash flows by inflows and outflows to
simplify your calculations)
Transcribed Image Text:A
Share Price
No. of Shares Outsta
Market Cap
Debt
Cash
Enterprise Value
Target Cash Flow
Assumptions
Cost of Capital
B
15.00 €
12,000,000.00
180,000,000.00 €
40,000,000.00 €
1,000,000.00 €
219,000,000.00 €
45,000,000.00 €
9.0%
с
D
E
Period
CF growth rate
Cash Outflow
Cash Inflow
Discount Factor
Discounted Cash Flow
NPV
F
0
0%
G
H
NPV Calculation
1
-5%
2
10%
3
15%
4
20%
K
5
25%
0.00 € 42,750,000.00 € 49,500,000.00 € 51,750,000.00 € 54,000,000.00 € 56,250,000.00 €
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