In an increasingly challenging business environment, El Pollo Loco is considering an acquisition of its major competitor,
Fantastic news! We've Found the answer you've been seeking!
Question:
In an increasingly challenging business environment, El Pollo Loco is considering an acquisition of its major competitor, Los Pollos Hermanos (LPH).You are CFO of El Pollo Loco and know the following about LPH.For the year that ended yesterday, LPH generated a positive cashflow of $86 million.Those cashflows are expected to grow throughout the foreseeable future at an annual rate of 5%.You estimate that an appropriate opportunity interest rate (required return) for LPH is 11%.
During preliminary negotiations with the owners of Los Pollos Hermanos, you have been offered the opportunity to acquire LPH for $1.3 billion (to be paid today).Using time value of money concepts, show whether you should accept the deal.
Posted Date: