Potential acquisition targets based on information provided

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Reference no: EM131568120

Photon Inc. is considering acquiring one of its competitors. Photon’s management wants to buy a firm it believes is most undervalued. The firm’s three major competitors, AJAX, BABO, and COMET, have current market values of $375 million, $310 million, and $265 million, respectively. AJAX’s FCFE is expected to grow at 11 percent annually, while BABO’s and COMET’s FCFE are projected to grow by 13 and 15 percent per year, respectively. AJAX, BABO, and COMET’s current year FCFE are $24, $22, and $17 million, respectively. The industry average price-to-FCFE ratio and growth rate are 12 and 10%, respectively. Estimate the market value of each of the three potential acquisition targets based on the information provided? Which firm is the most undervalued? Which firm is most overvalued? Make sure to show your work. 

Reference no: EM131568120

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