Will you suggest Unifeb to proceed the acquisition process

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Reference no: EM132943090

Question - Unifeb Inc aims to acquire Febuni Inc this year using cash. Before processing the M&A, Unifeb needs to calculate the value creation from Febuni Inc. The company hires you as the equity analyst to project the valuation of Febuni Inc. Below is the financial position of Febuni Inc

2020 (in Rm Million)

Net Revenue 20

Cost of goods sold 5

Administrative and selling expenses 3

Depreciation 5

Total Assets 100

Fixed asset Turnover 80%

Last Year Fixed Asset 30

In the financial report, Febuni Inc provides additional information, which is Assets Turnover Growth 2020 10%

Tax rate (Fixed) 22.5%

Assets Growth 2020 15%

Dividend Payout 30%

Annual COGS growth 10%

Fixed Assets Annual Growth 2%

Depreciation Growth 20%

Outstanding shares 500 million

The stock price per today is Rm 0.01, with total debt ratio of 15%. Note that the projected time period is 5 years, the year five free cash flow will be the terminal value. The debt ratio of the firm's capital structure is 40%. Current T-Bills rate is 6.5% with market return of 14%. Will you suggest Unifeb to proceed the acquisition process? Why?

Reference no: EM132943090

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