Super Care Plc. (SCP), a company listed on the London Stock Exchange, intends to acquire Fast Care
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Question:
Super Care Plc. (SCP), a company listed on the London Stock Exchange, intends to acquire Fast Care Limited (FCL), a small, unquoted company. The current stock price of SCP is £30 and there are 20 million shares outstanding. FCL has 50,000 shares outstanding with a face value of £5. The finance director of SCP estimates that considering FCL’s smaller size and other factors, after the acquisition, the investors would expect 140% of the return they currently require from SCP. The following table reports the total amount of dividends paid by both companies.
Year | SCP Dividend (£ million) | FCL Dividend (£ ’000) |
T – 4 | 5 | 62 |
T – 3 | 5.5 | 70 |
T – 2 | 6.5 | 78 |
T – 1 | 7.5 | 80 |
T | 8 | 90 |
Given this information, determine how much should SCP pay for FCL. Clearly state your
assumptions.
Related Book For
Corporate Finance Principles and Practice
ISBN: 978-1292103037
7th edition
Authors: Denzil Watson, Antony Head
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