Super Care Plc. (SCP), a company listed on the London Stock Exchange, intends to acquire Fast Care Limited (FCL), a small, unquoted company. The current stock price of SCP is £30 and there are 20 million shares outstanding. FCL has 50,000 shares outstanding with a face value of £5. The finance director of SCP estimates that considering FCL’s smaller size and other factors, after the acquisition, the investors would expect 140% of the return they currently require from SCP. The following table reports the total amount of dividends paid by both companies.

Year	SCP Dividend (£ million)	FCL Dividend (£ ’000)
T – 4	5	62
T – 3	5.5	70
T – 2	6.5	78
T – 1	7.5	80
T	8	90

Given this information, determine how much should SCP pay for FCL. Clearly state your
assumptions.

Answer rating: 100% (QA)

To determine how much SCP should pay for FCL we can use the discounted cash flow DCF method We will first calculate the present value of the future di... View the full answer