Question: The table below shows the projected cash flow statements for Porterfield Corporation, which is being considered as a target for Delany Tech, a large conglomerate.
The table below shows the projected cash flow statements for Porterfield Corporation, which is being considered as a target for Delany Tech, a large conglomerate. The projected data are for the postmerger period, and all synergistic effects have been included. Porterfield currently uses percent debt, and if it were acquired, Delany Tech would keep the debt ratio at percent.Both Delany Tech and Porterfield have a percent marginal federalplusstate tax rate. Some of the cash flows generated by Porterfield's subsidiary after the merger were retained to finance asset replacements and growth, while some will be transferred to Delany Tech to pay dividends on its stock, or for redeployment within the corporation. Porterfield's available cash flow are expected to grow at a constant percent rate after Projected Postmerger Cash Flow Statements for Porterfield's Subsidiary as of December millions of dollars are:Refer to table in imageWhat is the appropriate discount rate for valuing the acquisition?What is the terminal value? What is the value of Porterfield to Delany Tech?
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