You are assisting the chief financial officer (CFO) in conducting a due diligence to determine the...

 

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You are assisting the chief financial officer (CFO) in conducting a due diligence to determine the acquisition price of a target firm. Because the target firm is privately held, your CFO has identified 25 comparable firms as a benchmark. Table below summarizes the relevant information collected: Average of comparable firms. Price to Sales per share Price to EBIT per share i In addition, the following information about the target firm is available: Number of shares 5 million shares Sales: $35 million EBIT: $15 million The CFO is asking you to estimate the value of the target firm using the price multiple approach, based on the information provided. Required: Answer questions (a) and (b) below. a) [10 marks] Determine the target firm's sales per share and EBIT per share. *For full credit, you must show the steps/calculation toward your results . 8.0 20.0 . b) [10 marks] Provide two estimates of the per-share price of the target firm *Note: in case you are unsure about your results in part (a), you can use the following inputs for the target firm: Sales per sharetarget $14 and EBIT per sharetarget=$6 *For full credit, you must show the steps/calculation toward your results. You are assisting the chief financial officer (CFO) in conducting a due diligence to determine the acquisition price of a target firm. Because the target firm is privately held, your CFO has identified 25 comparable firms as a benchmark. Table below summarizes the relevant information collected: Average of comparable firms. Price to Sales per share Price to EBIT per share i In addition, the following information about the target firm is available: Number of shares 5 million shares Sales: $35 million EBIT: $15 million The CFO is asking you to estimate the value of the target firm using the price multiple approach, based on the information provided. Required: Answer questions (a) and (b) below. a) [10 marks] Determine the target firm's sales per share and EBIT per share. *For full credit, you must show the steps/calculation toward your results . 8.0 20.0 . b) [10 marks] Provide two estimates of the per-share price of the target firm *Note: in case you are unsure about your results in part (a), you can use the following inputs for the target firm: Sales per sharetarget $14 and EBIT per sharetarget=$6 *For full credit, you must show the steps/calculation toward your results.

Answer rating: 100% (QA)

a Target firms sales per share and EBIT per share Metric Calculation R... View the full answer