Reference no: EM132909776

Questions -

Q1. An analyst is evaluating a 20% investment position in a target company and has decided that the appropriate control premium is 30%. What should the analyst do to determine the maximum amount to offer for this position? Group of answer choices

a. Multiply the target's value of common equity by (1 - 0.25) and then multiply by 20%

b. Multiply the target's value of common equity by (1 - 0.30) and then multiply by 20%

c. Multiply the target's value of common equity by (1 - 0.23) and then multiply by 20%

d. Multiply the target's value of common equity by 1.30 and then multiply by 20%

e. Multiply the target's value of common equity by 20%

Q2. Note: The following information is common to the two questions on Avantes Engineering Corp.

The estimated enterprise value of Avantes Engineering Corp., a private engineering consulting firm located in Boston, is $125.47 million. The company's long-term debt currently equals $20.55 million. You have been retained by an investor group interested in acquiring Avantes to help with estimating the appropriate amount to offer. Based on recent transactions, you have determined that an illiquidity discount of 25% and a control premium of 20% are appropriate for Avantes.

Question: What is the maximum the investor group should offer for a full acquisition of Avantes? Report your answer in millions of dollars to two decimal places. Do not round numbers in intermediate steps.

Q3. Note: The following information is common to the two questions on Avantes Engineering Corp.

The estimated enterprise value of Avantes Engineering Corp., a private engineering consulting firm located in Boston, is $125.47 million. The company's long-term debt currently equals $20.55 million. You have been retained by an investor group interested in acquiring Avantes to help with estimating the appropriate amount to offer. Based on recent transactions, you have determined that an illiquidity discount of 25% and a control premium of 20% are appropriate for Avantes.

Question: What is the maximum the investor group should offer for a 25% investment in Avantes? Report your answer in millions of dollars to two decimal places. Do not round numbers in intermediate steps.