Question CS [3 marks]
Compute the value of control. [3 marks] Question C6 [8 marks] Compute WACC for the combined firm and the combined enterprise value. Don’t forget the synergies! [8 marks]
Question C7 [8 marks]
The status quo value of Company A is £3,800,000 million (use this value in your calculations). Assume that Company B has 150,000 million shares outstanding and a market value of debt of £55,000 million.
a)Calculate the maximum price per share that “A” should be willing to pay for “B” if it takes three years for control and synergies to materialize. [6 marks]
b) Calculate the premium that “A” would need to pay to “B” [2 marks] Question C8 [10 marks] This question is not related to questions C1 to C7.
C8-a Explain in detail how to obtain a company stock price through relative valuation applying
The PE ratio
The EV/EBITDA ratio.
C8-b Indicate, in bullet points, one advantage and one challenge per ratio that companies face when using these multiples in relative valuation. [10 marks, 5 each ratio]
