You are the CEO of a private company and want to buy it. There is one...

You are the CEO of a private company and want to buy it. There is one major shareholder who owns 70 percent of the firm. The remaining 30 percent is held by oceanic shareholders. Based on a DCF model, you estimate the base value of the firm to be $100 million. This excludes any liquidity discount and/or control premium. Based on your observations of the market, liquidity discounts are about 30 percent and control premiums are about 15 percent for similar deals. Your firm has 80 million shares outstanding.

What would you offer to pay in total and per share to the controlling shareholder? To the oceanic shareholders?What if it were not a private company but a public company. Show how would that change your calculation and answers?

Be sure to caluclate the DLOM/liquidity factor first then the value of the control/minority. Please make an excel chart.

Solutions

Expert Solution

Information provided in the question -

Now, find the value of the firm and as mentioned in the question calculate the DLOM/liquidity factor first then the value of the control/minority

If the company is not a private company but a public company, then the total value of the firm will be $100 Mn as we will not discount it with liquidity & control premiums.

jeff jeffy answered 5 months ago

Next > < Previous

Related Solutions

if you CEO of an X company when will you decide to buy derivatives , include...

if you CEO of an X company when will you decide to buy derivatives , include examples ?

You are the CEO of a midsize, software company in Saudi Arabia and want to take...

You are the CEO of a midsize, software company in Saudi Arabia and want to take your company global and offer your software worldwide. You will need to open offices in nations around the world. Would you 1) open offices in nations with high political and legal risks or 2) just focus on nations with low political and legal risks? What are the pros and cons for each strategy?

You are at XYZ Store and want to buy a replacement oven for your broke one...

You are at XYZ Store and want to buy a replacement oven for your broke one at home. The regular price for the oven you want is $1, 299.99 and is on sale 25% off. The cost for shipping and installing the oven is 199.99 (not part of the sale). After calculating the final price of the purchase there is a sales tax of 9.3%. You plan on financing this purchase with an annual interest rate of 22.5% for two...

This is all one question Part 1 Suppose you want to buy a stock in a...

This is all one question Part 1 Suppose you want to buy a stock in a firm called “Infinity” the firm states that they expect to pay you $1 per year forever. What is a fair price for this stock if an investment in similar firms return 5% per year? (The computation is based on time value of money computations we learned in Chapter 5. Hint: Is this a perpetuity, if so how would you value it (what is the...

Suppose you want to buy Amazon stock if and only if you can buy it for...

Suppose you want to buy Amazon stock if and only if you can buy it for less than $3100/share. The kind of order you should place today if it is trading at $3164/share is a: Select one: a. Limit order b. Market order c. Stop-loss order d. Fungible order

8 1. If you want to buy a new office in addition to your current one,...

8 1. If you want to buy a new office in addition to your current one, what kind of planning you will be required to do? 2. If Ikea wants to enter a new market, what would be its first step to understand the market? 3. As a manager of a technology company, you want to launch a new product in the market asap. How will you make sure that the decisions are faster as there is little time to...

You want to buy a $18,500 car. The company is offering a 3% interest rate for...

You want to buy a $18,500 car. The company is offering a 3% interest rate for gour years. a. what will your minthly apyment be? Round to the nearest cent. b. assuming you pay that monthly amount for the entire 4 years, what is the total amount of money you will pay during thise 4 years for the car. C. How much interest will you pay during thise 4 years.

You want to buy a $17,000 car. The company is offereing a 3% interest rate for...

You want to buy a $17,000 car. The company is offereing a 3% interest rate for 36 months (3 years). What will your monthly payments be?

You are the CEO of a Fortune 500 company. CNN informs you that in one hour,...

You are the CEO of a Fortune 500 company. CNN informs you that in one hour, a videotape will be broadcast in which several of your company’s vice presidents will be heard making offensive comments about other employees, the company in general, and your leadership abilities. What do you do?

It is time to buy a new car. You worked hard and want to buy an...

It is time to buy a new car. You worked hard and want to buy an expensive car (Porsche Cayenne) for $100,000. Porsche dealership will gladly finance your new purchase. However, the only way for you to be financed is to show them that you have 20% of the money needed. As soon as you have that much money in your account, the dealership will finance your new vehicle. You start saving for 52 months with the APR of 7.5%,...

Subjects