What is the maximum price per share

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A private equity firm wants to buy a controlling interest (51%) of Company ABC, hold and manage the company for five years, then sell its ownership stake. Company ABC has 10 million shares outstanding, currently trading at $38 per share. The potential buyer estimates that, including synergies, its 51% portion of Company ABC's incremental net cash flows for years one through five would be $74.0 million, $84.0 million, $80.0 million, $90.0 million, and $98.0 million, respectively. Additionally, the buyer estimates that its 5.1 million shares could be sold at the end of year five for $170.0 million. The private equity firm wants to use a risk-adjusted discount rate of 9.0%. What is the estimated value of this acquisition in total, and what is the maximum price per share the buyer should be willing to pay?

Reference no: EM132444633

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