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How much would jan ltd be prepared to pay

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Reference no: EM132796199

Question - Suppose Jan Ltd is acquiring Feb Ltd. Feb Ltd has assets with a book value of N$200 million and liabilities of N$80 million. The assets currently generate an annual after-tax free cash flow of N$22 million. This is expected to grow at a rate of 15% per annum for the next four years. Thereafter, the sustainable growth rate in cash flows is expected to be 5% per year. The firm's cost of capital is 12o/o. The liabilities are fairly valued.

Required -

(a) How much would Jan Ltd be prepared to pay for the equity of Feb Ltd?

(b) Explain briefly, any five reasons for a company undertaking a merger?

Reference no: EM132796199

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