Emerging Capital Market

Problem 14.1

NPV of original 1.074254734

NPV of option 0.950667906

14.3

It makes sense to wait one year and attempt to lock in the 50m cash flows.

14.4

Tax = -2.113481306

No tax = 1.973037387

EV = -0.070221959

Yes, accept the project

M&A incentives: Synergies, tax, purchase of assets < replacement costs, diversification, gaining control of larger enterprise, breakup value

Congeric merger: related industries but no customer-supplier relationship

Conglomerate: totally different industries

LBO – transaction where firms's publicly owned stock is acquired in a mostly debt-financed tender offer and a privately own highly leveraged firm results. The firm's own management often initiates the LBO.

Divesture: selling operating unit, spinning off to separate company, carving out by selling minority interest and outright liquidation

 clarifies operations, settles antitrust suits, enables management focus, raise capital

Discussion and Problem Solving: Q14.1, P14.3-5, Q26.1-5, P26.5-6

kProblem 14.1

NPV of original 1.074254734

NPV of option 0.950667906

14.3

It makes sense to wait one year and attempt to lock in the 50m cash flows.

14.4

Tax = -2.113481306

No tax = 1.973037387

EV = -0.070221959

Yes, accept the project

M&A incentives: Synergies, tax, purchase of assets < replacement costs, diversification, gaining control of larger enterprise, breakup value

...