Either two companies DHO (Acquiring Company) and Target (Target Company) which wish to merge in order...

 
 

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Either two companies DHO (Acquiring Company) and Target (Target Company) which wish to merge in order to achieve synergy gains by operating at the level of their operating expenses as well as at the level of their respective growth. The operating data relating to the two companies are presented in the following table: Post Income Operational costs / Revenue Operational costs without synergy Operational costs with synergy Tax rate Interest charges Damping growth g1 Horizon sustained growth g2 Horizon Bêta Risk free rate Expected market return Purchaser Target 2,000,000 750,000 65.00% 66.64% 66.00% 40.00% 120,000 70,000 12.00% 3 years 5.00% perpetuity 1.12 4.00% 12.00% 71.00% 40.00% 90,000 60,000 18.00% 6.00% 1.35 Required yield (CAPM) FMo FM, without synergy FMo with synergy Combined growth g1 Sustained growth combined g2 Work to do: 12.96% 418,000 554 500 565 000 14.80% 136,500 Determine the synergy gain achieved by the merged companies. 8 points Determine the maximum value of the target. 1 point Determine the premium that should be paid to be able to operate this merger. 1 point Either two companies DHO (Acquiring Company) and Target (Target Company) which wish to merge in order to achieve synergy gains by operating at the level of their operating expenses as well as at the level of their respective growth. The operating data relating to the two companies are presented in the following table: Post Income Operational costs / Revenue Operational costs without synergy Operational costs with synergy Tax rate Interest charges Damping growth g1 Horizon sustained growth g2 Horizon Bêta Risk free rate Expected market return Purchaser Target 2,000,000 750,000 65.00% 66.64% 66.00% 40.00% 120,000 70,000 12.00% 3 years 5.00% perpetuity 1.12 4.00% 12.00% 71.00% 40.00% 90,000 60,000 18.00% 6.00% 1.35 Required yield (CAPM) FMo FM, without synergy FMo with synergy Combined growth g1 Sustained growth combined g2 Work to do: 12.96% 418,000 554 500 565 000 14.80% 136,500 Determine the synergy gain achieved by the merged companies. 8 points Determine the maximum value of the target. 1 point Determine the premium that should be paid to be able to operate this merger. 1 point

Answer rating: 100% (QA)

a The synergy gain is the difference between the value of the company with synergy ... View the full answer