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    Calculating company value before and after merger.

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    1) Use table below for figuring free cash flows of acquisition target organization. Free cash flows include forecasted synergies.
    Buyer has WACC 20%
    What is the value of the acquisition target? Please show calculations.
    Free Cash Flow
    Year 1 $99,000
    Year 2 102,000
    Year 3 170,000
    Year 4 150,000
    Year 5 100,000

    2)Use table below to figure.
    Assume merger gains $25,000,000
    Combined company=30 million shares @ $100/share
    Combined company after the merge P/E ratio? Please show calculations.
    ($ in millions, except per share) Buyer Seller
    Price-Earnings Ratio (P/E) 20 12
    Shares Outstanding 20 20
    Price per Share $100.00 $45.00

    3) Variables involved in this free cash flow problem:
    Forecast for an organization is to generate EBIT of $500,000 over 5 years.
    Depreciation is forecasted to be $150,000 /year
    Corporate tax rate 40%
    Net working capital increase in year one of $50,000
    Decrease in year 5 of $25,000
    Figure the free cash flow from the project in year one. Please show all calculations.

    4) Use table below to figure working capital:
    a)During the year what was change in working capital?
    b) sales= $52,000
    costs=$39,000
    depreciation 0%
    Taxes 0%
    Figure cash flow. Please show calculations.
    Beginning End of Year
    Current Assets
    Accounts Receivable $24,000 $23,000
    Prepaid Expenses 5,000 6,000
    Inventory 12,000 12,500
    Fixed Assets 100,000 99,000
    Current Liabilities
    Accounts Payable 14,500 16,500
    Accrued Liabilities 7,500 6,500

    © BrainMass Inc. brainmass.com June 3, 2020, 10:33 pm ad1c9bdddf
    https://brainmass.com/business/mergers-and-acquisitions/calculating-company-value-before-and-after-merger-237747

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    Solution Summary

    The solution presents detailed steps for calculating the value of a company before and after its merger with another company.

    The solution also shows how to calculate the free cashflow for the company.

    $2.19

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