HELP THIS IS DUE IN $2$ DAYS!!!!

Case Report:

Each group should submit a case report to justify your ultimate recommendation. A list of questions is provided to help guide and focus your analysis on the next page. Your report should include $($but is not limited to$)$ analysis of these questions. Clearly state and explain any assumptions you make. State your specific recommendation and fully develop the logic to support it$.$ Relevant tables, figures, and computations may be included in the appendix and must be clearly referenced in the report. As a general rule, the text part of your report should be around $5$ pages. Your report $($together with the appendix$)$ should be submitted through the Blackboard portal. One copy is sufficient for the entire group.

Case Presentation Slides:

Each group also needs to submit a set of presentation slides through Blackboard. One copy is sufficient for the entire group.

Each group will be given $10$ minutes to present in class.

Mercury Athletic Footwear

Case Questions

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This case provides an opportunity to value a company in acquisition using the WACC$-$based Discounted Cash Flow $($DCF$)$ method. To value this investment opportunity, you need to estimate the cost of capital and predict future free cash flows for the acquired assets. The following questions should guide your thinking as you conduct valuation and provide the basis of your presentation.

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$1.$ Synergy and risks of this acquisition:$$

a$.$ What are the potential synergies created by combining Active Gear with Mercury Athletic Footwear?

b$.$ What are the risks faced by Active Gear in this deal?

c$.$ Comparing your answer in $($a$)$ and $($b$),$ does it make sense for Active Gear to acquire Mercury Athletic Footwear?

$2.$ Estimate the value of Mercury using a discounted cash flow approach using Liedtke$$s base case projections. Following the steps listed below. Make necessary additional assumptions and be prepared to defend them.$$

a$.$ What is the weighted average cost of capital? Should it base on Mercury$$s own cost of capital or AGI$$s$?$

b$.$ Estimate the free cash flows from $2007$ to $2011.$

c$.$ Develop an estimate for terminal value in $2011.$ Choose your method $($stable growth, multiples, or$/$and liquidation value$)$ and explain.

d$.$ What should be the maximum price AGI is willing to pay to acquire Mercury based on your estimates from $($a$)$ to $($c$)?$

$3.$ Review the projections formulated by Liedtke. Are they appropriate? If not, how would you recommend modifying them? How would your modification $($if any$)$ change the maximum price AGI is willing to pay for Mercury?

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The Ultimate Question:

Do you recommend AGI to acquire Mercury? If so$,$ what price?