As the finance manager, your task is to assess which of the potential acquisition targets was more

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Question:

As the finance manager, your task is to assess which of the potential acquisition targets was more suitable for GTG Limited. For you to accomplish this task, you will be required to adhere to the specific acquisition guidelines policies of GTG Limited in Geneva.

You will be required to:

1. Determine the free cash flows from each of the potential acquisition targets, for each of the next 3 years, 2021, 2022 and 2023.

2. Evaluate the proposals. a. For each proposed acquisition, calculate the net present value based on the cash flow you calculated in answering question and the proposed acquisition price provided in each case. In order to calculate the net present value in relation to each of the selected proposals, the organization requires a minimum of the weighted average cost of Capital. Currently this is 5% plus a risk premium of 2%. This will satisfy shareholders return in Geneva.

3. Finance the acquisitions a. The company wishes to fund the acquisition using a bond issue. Assuming the bonds will be issued for 5 years with a coupon rate of 6.5%, and GTG New Zealand wishes to raise $1,000,000. Determine the price and number of bonds to be issued given that the market rate for similar bonds is 8%.

4. Prepare a board report (that the directors of GTG New Zealand and Geneva can. The should highlight your recommendations based on your calculations. In addition, raise any concerns or aspects you may have other than quantitative analysis that may assist in the evaluation of the potential acquisition.