The following represents the target's accounting data you have estimated for the years 2020-2021. Assume that...

 

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The following represents the target's accounting data you have estimated for the years 2020-2021. Assume that all of these numbers are end-of-year data (ie. today is January 1st, 2020 and the revenues, etc. are at the end of 2020, 2021). In addition, you have the following information for the target and the acquiring firm. 2021 Revenues Cost of Goods Sold Depreciation A&G Interest Retained Earnings Target 2020 $100,000,000 $30,000,000 $10,000,000 $8,000,000 $4,000,000 $2,000,000 BL = 1.8 Taxes = 40% Cap Structure: Debt = 20% # of Shares Outstanding = 4,500,000 Current Price per Share = $30 Est. Future Growth Rate = 4% $120,000,000 $55,000,000 $15,000,000 $11,000,000 $5,000,000 $3,000,000 Acquiring Firm Cap Structure: Debt = 70% Taxes = 35% Other Information T-bond rate 5% Mkt Risk Premium = 6% € (5 points) Why is this rate so high? (15 points) Calculate the target firm value. (5 points) What would be a reasonable offer (ie. $/share) for the target. The following represents the target's accounting data you have estimated for the years 2020-2021. Assume that all of these numbers are end-of-year data (ie. today is January 1st, 2020 and the revenues, etc. are at the end of 2020, 2021). In addition, you have the following information for the target and the acquiring firm. 2021 Revenues Cost of Goods Sold Depreciation A&G Interest Retained Earnings Target 2020 $100,000,000 $30,000,000 $10,000,000 $8,000,000 $4,000,000 $2,000,000 BL = 1.8 Taxes = 40% Cap Structure: Debt = 20% # of Shares Outstanding = 4,500,000 Current Price per Share = $30 Est. Future Growth Rate = 4% $120,000,000 $55,000,000 $15,000,000 $11,000,000 $5,000,000 $3,000,000 Acquiring Firm Cap Structure: Debt = 70% Taxes = 35% Other Information T-bond rate 5% Mkt Risk Premium = 6% € (5 points) Why is this rate so high? (15 points) Calculate the target firm value. (5 points) What would be a reasonable offer (ie. $/share) for the target.