Practice Questions Lecture 3

Practice Questions Lecture 3 - FINA 5512 VALUATION Lecture...

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FINA 5512 VALUATION Lecture 3 Applying Relative, Asset Oriented, Valuation Methods to Mergers and Acquisition Chapter 8: Question 8.21 Question 8.22 Question 8.23 Additional Practice Problems: 1. As a result of a maturing product market, Passe Inc. projected future cash flows for the next five years of $(50), $15.0, $10.0, $6, $4, $2, and $.5. The sizeable negative cash flows in the first year reflected anticipated weakness in the economy, R&D, and marketing expenses. However, despite a recov ery in the economy, demand for the firm’s current products was expected to decline. Moreover, new competitors were expected to take market share from the firm. However, Passe had a new patented technology which offered the potential for introducing new p roducts that could reinvigorate the firm’s growth. Longview Inc. was considering acquiring Passe and viewed gaining the exclusive right to the new technology as a call option to expand Passe’s current product offering.
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