Hello,

Using the information below please answer question 7 (answer to question 1 and 5 below):

Answer to Question 1 below:

Answer to question 5 below:

First we have to compute the present value at the year 2020 and then we have :500/10% 5000 million :5000/(1+10%)15 3104.61 million Discussion Questions 1. Based on the information provided in Table 8.5, what do you believe is a reasonable stand- alone value for St. Jude Medical? (Hint: Use the comparable company valuation method to derive a single point estimate of stand-alone value.) Show your work. 2. Does your answer to question (1) include a purchase price premium? Explain your answer 3. What are the key limitations of the comparable companies valuation methodology? Be specific. 4. In estimating the value of anticipated cost savings, should an analyst use St. Jude's marginal 5. What is the PV of the $500-million pretax annual cost savings expected to start in 2020? Assume the 6. What are the key valuation assumptions underlying the valuation of St. Jude Medical? Include 7. What is the maximum amount Abbott Labs could have paid for St. Jude Medical and still tax rate of 409, or its effective tax rate of 22%? Explain your answer. appropriate cost of capital is 10% and that the savings will continue in perpetuity. Show your work. both the valuation of St. Jude as a stand-alone business and synergy value. Be specific. earned its cost of capital? Did Abbott overpay for St. Jude based on the information given in the case? Explain your answer. [Hint: Use your answers to questions (1) and (5).] First we have to compute the present value at the year 2020 and then we have :500/10% 5000 million :5000/(1+10%)15 3104.61 million Discussion Questions 1. Based on the information provided in Table 8.5, what do you believe is a reasonable stand- alone value for St. Jude Medical? (Hint: Use the comparable company valuation method to derive a single point estimate of stand-alone value.) Show your work. 2. Does your answer to question (1) include a purchase price premium? Explain your answer 3. What are the key limitations of the comparable companies valuation methodology? Be specific. 4. In estimating the value of anticipated cost savings, should an analyst use St. Jude's marginal 5. What is the PV of the $500-million pretax annual cost savings expected to start in 2020? Assume the 6. What are the key valuation assumptions underlying the valuation of St. Jude Medical? Include 7. What is the maximum amount Abbott Labs could have paid for St. Jude Medical and still tax rate of 409, or its effective tax rate of 22%? Explain your answer. appropriate cost of capital is 10% and that the savings will continue in perpetuity. Show your work. both the valuation of St. Jude as a stand-alone business and synergy value. Be specific. earned its cost of capital? Did Abbott overpay for St. Jude based on the information given in the case? Explain your answer. [Hint: Use your answers to questions (1) and (5).]