Cloud Corp, an MNC in the US, intends to take over a company in Canada. Estimated revenue of target. The target company's revenue for the current year is C$ I00,000. Cloud Corp is confident that it can increase revenue by 10% every year until the end of the year.

Estimated expenses of target:

In the current year the cost of good sold was 50% of revenue. The cost of good sold after take over will decrease to 45% of revenue. Depreciation costs are estimated at C$11 million per year

Estimated Earnings :

Tax on operating profits is 25% of the target company's estimated profit. Net Cash Remitted to Parent:

The target company will return funds (remit) to the parent in the amount of 95% of the net cash inflow generated and the remaining 5% will be used to increase operational funds.

 

Present Value terhadap estimated cash flow

The expected required rate for this project is 17%

Assume that the number of target company shares outstanding is 11,000,000 shares with a value of C $ 15/share. Regarding this take over plan, Cloud Corp will pay a premium of 30% above the share value

The target company's financial data before take over (in millions) is as follows:

 

Revenue	C $ 100
Cost of good sold	50
Selling and administrative expenses	25
Depreciation	10

 

Determine whether the target company is worthy of being taken over, make an analysis in the form of capital budgeting.

What other factors does the parent company need to consider when taking over a company in another country?