FIN680 CASE 43

2. Do you favor the proposed acquisition of UCP? What are the primary sources of value in such a transaction? Is the proposed price reasonable?

Failure to handle these situations properly can lead to huge product liability suits and even bankruptcy.

To relever the βe, we use the formula, βe = βu +(D/E)*(βu-βd). And the “Target D/E” was found by taking “Target D/V” divided by “1-Target D/V”. So we get the new βe, 1.3576. Then to get cost of equity, we use the CAPM formula, Re=Rf+β(EMRP), 11.7679%. Since we have get the cost of equity and cost of debt, we can determined the WACC, which is equal to Equity/Value*Cost of Equity+Debt/Value*Cost of Debt*(1-tax rate). In the end ,we arrived at 8.48%.

Agro-Chem, Inc. is a regional producer of agricultural chemicals based in Houston Texas that needs help making a lease versus purchase decision. By understanding the material presented, we will be able to come to a decision. However, after reviewing the information presented, there are a few problems that need to be investigated before finalizing our recommendation. Agro-Chem, Inc. chose to go with the financial manager’s idea of using a discount rate of 14% (average risk) to figure out the present value costs of leasing and purchasing even though the assistant treasure suggested a 12% (low risk) discount rate. Agro-Chem, Inc. brought in the company’s CPA to help settle the debate

In early May 2008, talk began between president of Flinder Valves, Bill Flinder and Tom Eliot, chairman and CEO of RSE about a possible acquisition of Flinder Valves by RSE. The industrial manufacturing industry had taken a hit due to rough economic times and the acquisition made sense. Both leaders were very concerned about the challenges and risks of the deal. Flinder was a company that engineered and manufactured specialty valves and heat exchangers. These products required extensive research and development and they were one of very few firms working in these types of applications. A bullk to FVC’s sales came from defense and aerospace applications. They were known for their

I used WACC as the discount factor, we expect the rate of return to be higher than it, the same at least. The WACC reflects the average risk and overall capital structure of the entire firm [2]. It’s the required return and it presents how much the company pays for the capital it finances. In this case, the cost of equity is 10.33%, the cost of debt is 6.50%. I calculated WACC using those numbers and got a result of 8.49%.

SET IN MAY 2008, THIS CASE REFLECTS THE SEPARATE PERSPECTIVES OF CHIEF EXECUTIVE OFFICERS TOM ELIOT AND BILL FLINDER AS THEY APPROACH THE NEGOTIATIONS OF RSE INTERNATIONAL CORPORATION TO ACQUIRE FLINDER VALVES AND CONTROLS INC. YOUR TASK IS TO COMPLETE A VALUATION ANALYSIS OF THE TARGET AND BUYER AND TO NEGOTIATE A PRICE

However, United Chemical's offer of $160 million is well under the value of the IPD. According to our valuation, Nova could sell IPD for a price between $256 million and $501 million.

Finally, selecting between both alternatives. Alternative 2 is the one I would choose, because it exhibits the values of confidentiality, integrity, objectivity, and responsibility to his client. Those are very important rules to respect in accounting. William should find the best way of explaining the situation to his friend to save their friendship. He can tell Bill that telling him about Jack’s plan might cause him (Williams) serious problem in his professional life because he will be losing his confidentiality. Also, with this alternative, Williams will save his engagement with the Oneway

The next step was to calculate the free cash flows for the eleven-year period. In order to do so, we used to following formula: FCF = EBIT(1-tax) + depreciation - change in NWC – CapEx. From here, we used to WACC of 13.89% previously calculated, in order to find the present value of each FCF.

Designed processes for identifying, evaluating and engaging companies displaying potential acquisition opportunities and/or capital needs. Executed strategy development; deal initiation and negotiation; utilizing due diligence and integration with senior executives and client company officers.

I chose these stocks because they both have a history of being relatively consistent with gradual gains throughout their stock history. Both these stocks don’t show much of a risk as they are both apart of industries that are thriving. I did not invest in these stocks during the Sifma Stock Market Game since it only has a duration of about seven months and would not work well with my long-term value investment strategy. These investments correlate with my strategy very well as they show very little risk, long term, and are undervalued at this

At the beginning the offer was a reaction to the CSX bid; then other factors came into play, such as time, the time span until the vote of the shareholders, the legal procedure (since the judge ruled against Norfolk Southern). Secondly, the outcome of this process will determine the future development of the companies involved. The merged companies, the winners, will survive, whereas the loser will disappear from the market. Based on this fact we might assume that each

Ecton should go ahead with its plans of finding a suitable acquirer. This would give the original investors the greatest return on investment, as well as an acceptable exit strategy. Ecton

7. Compare your valuation with Smith Barney’s. What assumptions do you have to make to get the terminal value EBITDA multiples used by Smith Barney. Is there any benefit of their method relative to FCF method?