It is December 2021. You work as a financial analyst for Merck & Co. and are...

Transcribed Image Text:

It is December 2021. You work as a financial analyst for Merck & Co. and are tasked with the due diligence on the proposed acquisition of a biotech startup. You estimated the following cash flows for the startup: 0+ decimals After 2026, cash flows are expected to grow by 2% per year. Based on the riskiness of your industry, you think that your weighted average cost of capital is 12%. The biotech firm has 5 million shares and bonds worth $120 million outstanding. Submit Year Part 1 Attempt 3/5 for 1.2 pts. What is the terminal value, i.e., the present value of all free cash flows from 2027 to infinity expressed in 2026-dollars (in $ million)? 2022 2023 2024 2025 2026 0+ decimals Expected cash flow from assets ($ million) (end of year) 73.5 110.25 143.33 171.99 189.19 Submit Part 2 What is the total value of the company (in $ million)? Part 3 What is the value per share of common stock (in $)? Attempt 2/5 for 1.6 pts. Attempt 2/5 for 1.6 pts. It is December 2021. You work as a financial analyst for Merck & Co. and are tasked with the due diligence on the proposed acquisition of a biotech startup. You estimated the following cash flows for the startup: 0+ decimals After 2026, cash flows are expected to grow by 2% per year. Based on the riskiness of your industry, you think that your weighted average cost of capital is 12%. The biotech firm has 5 million shares and bonds worth $120 million outstanding. Submit Year Part 1 Attempt 3/5 for 1.2 pts. What is the terminal value, i.e., the present value of all free cash flows from 2027 to infinity expressed in 2026-dollars (in $ million)? 2022 2023 2024 2025 2026 0+ decimals Expected cash flow from assets ($ million) (end of year) 73.5 110.25 143.33 171.99 189.19 Submit Part 2 What is the total value of the company (in $ million)? Part 3 What is the value per share of common stock (in $)? Attempt 2/5 for 1.6 pts. Attempt 2/5 for 1.6 pts.

Answer rating: 100% (QA)

To calculate the present value of all free cash flows from 2027 to infinity terminal value and the total value of the company we can use the Gordon Gr... View the full answer