Grade 9,0
Corporate Finance II

Interco
Advanced Valuation

Comments from teacher: In question 1, why do we use these equitation’s, explain and show then, i.e. ROE can go up with more leverage. More on comparables. In Q1 assumptions explained, that are then used in DCF. Max for question 1 and 2, two pages. Must power to put in Q3. Deduct tax in table 3. In DCF, show more how calculated and assumption missing about other income and corporate expenses. Table 6 to be fixed (already been done). Skip in DCF advantage and disadvantage. Do table 4 different, use Exhibit 11, value range, use median value and calculate enterprise value with multiples en deduct net debt 318,5 and get equity value. Explain better in main text footnote 12. . Use
6 Case problems in finance, Kester, page 573

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billion in retained earnings at first quarter 1988 which could partly be used to pay down financing. Interco has a relatively high asset base represented by total assets of about $2 billion. Generally, higher the asset base and nearer to the firms value the desirable the target is. The assets can be used for collateral for less expensive financing or give a disposal opportunities of non-operating assets. Acquirers often see opportunity to reduce current ratio to accelerate free cash flow. Interco had a relatively high current ratio of 3,1 which could potentially be driven down to more efficient level achieving onetime cash inflow. As a member of Interco’s board are you persuaded by the premiums paid analysis (Exhibit 10) and the comparable transaction analysis (Exhibit 11)? Why? Premium paid and comparable transactions analyses are good tools to reach a value range of a firm based on real transactions. In Interco’s case the advisor and acting analyst, WP&Co, will be paid a substantial fee if City Capital rescinds its bid, therefore WP&Co may be inflicted to present biased outcome with higher price range, leaving the board of