It is January of 2020. Rapid Corporation is in the process of acquiring Tamed Inc. Tamed Inc.
Question:
It is January of 2020. Rapid Corporation is in the process of acquiring Tamed Inc. Tamed Inc. has two divisions: oil and gas and retail grocery. The current number of outstanding shares is 200.
- Which companies (Choose from the provided list) should you include in your analysis? Explain!
- What do you recommend for the total value of the oil and gas division? What about the retail grocery division? Explain how you collect the required information.
- The management of Tamed Inc. has informed Rapid Corporation that the Cost of goods sold for the retail grocery division was abnormally high this year due to the temporary closure of one of the local suppliers. We expect a much lower cost of goods sold for that division in the future. Given this information, what do you recommend for the total value of the oil and gas division? What about the retail grocery division?
- Rapid Corporation is offering $71 per share. Given the information in part (b), would you recommend the shareholders of Tamed Inc. to accept the offer or decline it? Explain!
Hint: You need to use multiples in your analysis and valuation of Tamed Inc.!
Statement of Comp. Income (Oil and Gas Division) | |
Sales | 2,000 |
Cost of goods sold | 700 |
Depreciation | 300 |
EBIT | 1,000 |
Interest paid | 200 |
Taxable income | 800 |
Taxes (40%) | 320 |
Net Income | 480 |
Statement of Comp. Income (Retail Grocery Division) | |
Sales | 15,500 |
Cost of goods sold | 14,400 |
Depreciation | 500 |
EBIT | 600 |
Interest paid | 100 |
Taxable income | 500 |
Taxes (40%) | 200 |
Net Income | 300 |
Statement of Comp. Income (Consolidated Statement) | |
Sales | 17,500 |
Cost of goods sold | 15100 |
Depreciation | 800 |
EBIT | 1,600 |
Interest paid | 300 |
Taxable income | 1,300 |
Taxes (40%) | 520 |
Net Income | 780 |
Companies | |
Enbridge Inc. | Air Canada Inc. |
Suncor Energy Inc. | Canadian Natural Resources |
Imperial Oil Ltd | Pizza Pizza Royalty Corp |
Loblaw Companies Ltd | Canadian Tire Corp. |
Metro Inc. | TC Energy Corp. |
Expert Answer:
The recommended values for the oil and gas and retail grocery divisions and whether shareholders should accept Rapid Corporations offer Companies to I... View the full answer
