Acme is also considering the acquisition of a firm
in the Czech Republic and would like your opinion on this. It plans to
operate the firm for 3 years and then reevaluate the holding.
Free Cash flows are estimated as follows:
• Year 1 - 38.63M Czech Koruna (CZK), Year 2 - 44.33 M CZK,
• Year 3 - 50.48M CZK
• The third year terminal value is estimated at 375M CZK.
The Czech Koruna's exchange rate is assumed to be .038 USD/CZK for each
year. Acme uses a WACC of 13 % for its domestic projects. So, the PV of
the FCF's for the firm is 363.78 M CZK or $13.82M. The Czech firm has
1,000,000 shares outstanding and a debt to equity ratio of 1:1. Current
market price is 185 CZK per share.
All monetary information (except per share) should be presented in CZK millions (i.e., do not convert to USD).
1. Should Acme make a deal if its policy is to never exceed a 20%
premium in any tender offer? To defend your position, you must prepare
and present an Excel template that includes the calculated fair value
premium over market.
2. What changes in the analysis or additional analysis do you suggest before a final decision should be made?
3. Using the DCF methodology required in question 1, please take one of
your suggestions and reevaluate the buy-out. To complete this question,
you will have to present a second Excel template that includes your new
assumed values and supports your recommendations. Further, please comply
with the following:
• Assumptions must be reasonable – i.e., don’t select arbitrary values.
Some discussion should be provided that explains how you arrived at your
new assumed values.
• Variable changes should be restricted to the discount rate, the FCFs,
and/or the terminal value. Please present only one set of assumptions
(e.g., do not submit a table that includes multiple values for the same
variables.)
• To demonstrate that you have successfully prepared the Excel template,
no two students may use the same values. To help ensure that your
values are unique, please use a minimum of three significant (i.e.,
non-zero) digits to the right of the decimal point.
Question is Acme is also considering the acquisition of a firm in the
Czech Republic and would like your opinion on this. It plans to operate
the firm for 3 years and then reevaluate the holding.
Free Cash flows are estimated as follows:
• Year 1 - 38.63M Czech Koruna (CZK), Year 2 - 44.33 M CZK,
• Year 3 - 50.48M CZK
• The third year terminal value is estimated at 375M CZK.
The Czech Koruna's exchange rate is assumed to be .038 USD/CZK for each
year. Acme uses a WACC of 13 % for its domestic projects. So, the PV of
the FCF's for the firm is 363.78 M CZK or $13.82M. The Czech firm has
1,000,000 shares outstanding and a debt to equity ratio of 1:1. Current
market price is 185 CZK per share.
All monetary information (except per share) should be presented in CZK millions (i.e., do not convert to USD).
1. Should Acme make a deal if its policy is to never exceed a 20%
premium in any tender offer? To defend your position, you must prepare
and present an Excel template that includes the calculated fair value
premium over market.
2. What changes in the analysis or additional analysis do you suggest before a final decision should be made?
3. Using the DCF methodology required in question 1, please take one of
your suggestions and reevaluate the buy-out. To complete this question,
you will have to present a second Excel template that includes your new
assumed values and supports your recommendations. Further, please comply
with the following:
• Assumptions must be reasonable – i.e., don’t select arbitrary values.
Some discussion should be provided that explains how you arrived at your
new assumed values.
• Variable changes should be restricted to the discount rate, the FCFs,
and/or the terminal value. Please present only one set of assumptions
(e.g., do not submit a table that includes multiple values for the same
variables.)
• To demonstrate that you have successfully prepared the Excel template,
no two students may use the same values. To help ensure that your
values are unique, please use a minimum of three significant (i.e.,
non-zero) digits to the right of the decimal point.
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