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Calculating company value before and after merger.

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
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


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.