Calculated fair value premium over market

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Reference no: EM13302137

Acme is also considering the acquisition of a firm in the Czech Republic and would like your opinion on this. It plans to operate the firm for 3 years and then reevaluate the holding.

Free Cash flows are estimated as follows:

•Year 1 - 38.63M Czech Koruna (CZK), Year 2 - 44.33 M CZK,
•Year 3 - 50.48M CZK
•The third year terminal value is estimated at 375M CZK.
The Czech Koruna's exchange rate is assumed to be .038 USD/CZK for each year. Acme uses a WACC of 13 % for its domestic projects. So, the PV of the FCF's for the firm is 363.78 M CZK or $13.82M. The Czech firm has 1,000,000 shares outstanding and a debt to equity ratio of 1:1. Current market price is 185 CZK per share.

All monetary information (except per share) should be presented in CZK millions (i.e., do not convert to USD).

Question#1

1.Should Acme make a deal if its policy is to never exceed a 20% premium in any tender offer? To defend your position, you must prepare and present an Excel template that includes the calculated fair value premium over market.

 

Reference no: EM13302137

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