In late 2016, soon after Ferriss return as CEO, the firm receives an unsolicited offer....
80.2K
Verified Solution
Link Copied!
Question
Accounting
In late 2016, soon after Ferriss return as CEO, the firm receives an unsolicited offer. of $210 million for its outstanding equity. If Ferris accepts the offer, the deal would close at the end of 2016. Suppose Ferris believes that Idexo can be sold at the end of 2018 for an enterprise value equal to nine times its final EBITDA. Idexos unlevered cost of capital is 10% (specifically, 10% is the pretax WACC). Based on your forecast of Idexos free cash ow in 2017-2021 in , and its final enterprise value in 2021, estimate the following:
Idexos unlevered value at the end of 2016.
The present value of Idexos interest tax shields in 2017-2021. (Recall that these tax shields are fixed and so have the same risk level as the debt.)
Idexos enterprise value at the end of 2016. (Add the present value of the interest tax shield in (b) to the unlevered value of the firm in (a).)
Idexos equity value today. (Adjust the enterprise value in (c) to reflect the firms debt and excess cash at the end of 2016.)
Based on your analysis, should Ferris sell the company now
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
