Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
P&G had earnings before interest and taxes of $10,927milliononrevenuesof$56,741million.The tax rate for the firm is 35%. Th ...
Basedontheseinputs,thecashflowstoP&Goverthenext fiveyearsandfortheterminalvaluecanbecalculated(dollar amounts in millions): ...
risk-freerateof4.25%andariskpremiumof4%,the resulting cost of capital for the firm is 7.39%. Wewillassumethattheaveragereinvest ...
Theterminalvalueisestimatedusingthecashflowsinthe terminalyear,thecostofcapitalinperpetuity(7.39%),and the expected growth rate ...
increasethecombinedfirm’spretaxoperatingincome by $200 million. Thecombined firmwillalsobe able togeneratea slightlyhigherafter ...
Basedontheseassumptions,thecashflowsandvalueofthe combined firm, with synergy, can be estimated (dollar amounts in millions): As ...
Value of combined firm (with no synergy)$158,467 million Value of synergy $5,405 million Thisvaluationisbasedonthepresumptiontha ...
notcapture.Theseoptionscanbetheresultofmoregrowth opportunities or a better competitive position for the combinedfirmormoreadvan ...
Atakeovermotivatedonlybydiversificationconsiderations should,byitself,havenoeffectonthecombinedvalueofthe twofirmsinvolvedin the ...
averagecostofcapitalandthevalueofthefirmsareshownin Table 15.3. TABLE 15.3Value of Lube& Auto, Dalton Motors,and Combined Fi ...
diversifyingintobusinessesinwhichtheacquiringfirmhas littleexpertisecanresultinlessefficientoperationsafterthe merger (reverse s ...
reasons.Thefirstislimitedaccesstocapitalmarketsandthe resultingcapital-rationingconstraint.Smallfirmsandprivate businessesoftenh ...
combinedfirm.Asasimpleexample,assumethatfirmAis cash richand project poor and has a cash balanceof $10 billion.AssumethatfirmBis ...
futureyears.Note,though,thatanotheraccountingitemthat accruesfromacquisitions,whichisgoodwill,doesnotyield the same tax benefits ...
thevalueofthetaxsavingssynergy,ifweassumethatthe target firm could never have used the net operating loss. Things become progres ...
One of the earliestleveraged buyouts (LBOs)occurred in 1979 andinvolvedCongoleumInc.,adiversifiedfirminship building,flooring,an ...
Debt Capacity Ifthecashflowsoftheacquiringand targetfirms areless thanperfectlycorrelated,thecashflowsofthecombinedfirm willbe l ...
perfectlycorrelated.Thedebtcapacitybenefitsincreaseasthe earnings of the two firms become less correlated and as investors becom ...
to1.1866andnochangeinthecostofdebt),thevalueofthe combined firm after the takeover can be estimated as shown: Asaconsequenceofth ...
earnings per share increase after the acquisition, whereas acquiring a company with a P/E ratio of 40 will lower earnings per sh ...
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