Question details

Acquisition and mergers
$ 20.00
case 1
You, as an analyst at an investment bank, has been commissioned to value the company
your client is a mining unit with exhaustible resources, as an investor is
offering a range of US $ 55 per share to buy your company, you must issue
an opinion on whether the price is right to sell.
The company has a debt level of US $ 80MM, 50% bonds at a coupon rate
6% and the difference through a syndicated loan at an interest rate of 9%
· There preferred shareholders whose equity value is a US $ 20MM
guaranteed minimum dividend of 11%
· The amount of common shares is US $ 40MM and retained earnings is US $
· The risk-free rate of T-bills is 2.18%
· The market yield is 8.54%
· The company has two business units, estimates the value of the first unit
representing 65% of the total and has a leveraged beta of 1.4 and the second unit is
less risky having a beta leveraged 0.9
· The country risk rate is 2.2%
· The rate of income tax is 30%
· For the next 10 years, the company expects cash flows growing at the end of year 1
Free cash flow (FCF) was US $ 30MM and a growth rate of 8% is expected
· There 3'500,000 authorized shares, of which 3,000,000 are in
· The cash balance is US $ 4MM and marketable securities at the time of recovery is
US $ 1bn
· Do not assume any perpetuity
· The current market price is $ 52 per share
The director has been charged with assessing the next company to assess if possible
sell and that in recent years has not generating added value as an investment
additional holding and the future of the sector that caters to value the company being
somewhat unstable, the ideal is that shareholders can be sold from 70 million
USD. Indicate if possible, for it has the following data:
Statement of Financial Position (in thousands of dolares)        
Current assets       46,290.00  Current liabilities   36,157.00      
Fixed assets       52,294.00  Non-current liabilities    22,687.00      
     heritage    39,740.00      
Total Assets       98,584.00    98,584.00      
Statement of Income        
(Thousand USD)        
Sales          84,920.00          
Costs and expenses         76,347.00          
depreciation           2,615.00          
Operating income         5,958.00          
Financial expenses           2,401.00          
UAI         3,557.00          
Tax           1,067.00          
Net income         2,490.00          
· Sales rose by 5%            
· The proportion of costs and expenses remain constant sales        
· The capex will be 2 million soles annually        
· The depreciation rate is 5%          
· Working capital is calculated based on sales        
· The capital requirement related to the growth in sales work; without      
But for conservative purposes is added 3%        
· The company historically has distributed 60% dividend        
· The accounts payable is 17 million soles, the rest is debt liabilities      
· There marketable securities 2 million soles        
· Take a horizon of five years          
· The international economic sector beta is 0.8        
· The risk-free rate is 3.5%          
· The market risk premium is 5%          
· The country risk is 2%            
· The rate of income tax is 30%          
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