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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

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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.

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