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1888 Words May 18th, 2012 8 Pages
1. Do you think Mercury is an appropriate target for AGI? Why or why not?

Mercury is an appropriate target for AGI. AGI is looking to increase its revenue and profit by utilizing synergies. The initial aim of AGI for acquiring Mercury Athletics is to increase leverage with contract manufacturers and to boost the cooperation with the retailers and distributors. AGI was one of the most profitable and successful companies in the market segment, but the firm’s size remained rather small in comparison with the main competitors. Therefore, with the acquisition of Mercury, AGI planned to build competitive advantage. Besides, the target company had well developed operation infrastructure, impressive labor facilities in China and numerous
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|0

|0

|0

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Operating Income | -463 | 0

|0

|0

|0

|

||||||

Consolidated Revenue 570,319 | 597,717 |

| 479,329

| 489,028

| 532,137

|

Less: Operating Expenses | 423,836 498,535 | 522,522 |

| 427,333

| 465,110

|

Less: Corporate Overhead | 8,487 10,098 | 10,583 |

| 8,659

| 9,422

|

Consolidated Operating Income | 61,686 | 64,612 |

| 47,006

| 53,036

|

57,605

||||||

Estimated Capital Expenditures | 14,258 | 14,943 |

| 11,983

| 12,226

|

13,303

Estimated Depreciation 11,406 | 11,954 |

| 9,587

| 9,781

| 10,643

|

Combined:

Operating Results: | 2007 | 2008 | 2009 | 2010 | 2011 |

Revenue

| 479,329 | 489,028 | 532,137 | 570,319 | 597,717 |

Less: Divisional Operating Expenses 498,535 | 522,522 |

| 423,837 | 427,333 | 465,110 |

Less: Corporate Overhead | 8,487 | 8,659 | 9,422 | 10,098 | 10,583 |

EBIT | 47,005 | 53,036 | 57,605 | 61,686 | 64,612 |

Less: Taxes | 18,802 | 21,214 | 23,042 | 24,675 | 25,845 |

NOPAT

| 28,203 | 31,822 | 34,563 | 37,012 | 38,767 |

Plus: Depreciation | 9,587 | 9,781 | 10,643 | 11,406 | 11,954 |

Less: Changes in Working Capital | 4,567 | 2,649 | 9,805 | 8,687 | 6,233 |

Less: Capital Expenditures | 11,983 | 12,226 | 13,303 | 14,258 | 14,943 |

Less: Change in Other Assets

|0|0|0|0|0|

Plus: Changes in Other Liabilities | 0 | 0 | 0 | 0 | 0 |

Unlevered Free Cash Flow (FCF) 29,545 |

| 21,240 |
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