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. Laura 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).
1. Should Laura make this deal if its her 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.
2. What changes in the analysis or additional analysis do you
suggest before a final decision should be made?
3. Using the DCF methodology required in question 1, please take
one of your suggestions and reevaluate the buy-out. To complete this
question, you will have to present a second Excel template that
includes your new assumed values and supports your recommendations.
Further, please comply with the following:
* Assumptions must be reasonable ? i.e., don?t select arbitrary
values. Some discussion should be provided that explains how you
arrived at your new assumed values.
* Variable changes should be restricted to the discount rate, the
FCFs, and/or the terminal value. Please present only one set of
assumptions (e.g., do not submit a table that includes multiple values
for the same variables.)
* Use a minimum of three significant (i.e., non-zero) digits to the
right of the decimal point. |
