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a7interco - Autumn 2011 Managerial Finance Prof Francisco...

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Autumn 2011 Managerial Finance Prof. Francisco Pérez-González Firm Valuation: Interco Read and prepare: Interco (in the course reader). Big picture question: Assuming you were on Interco’s Board of Directors, would you accept City Capital’s offer? Questions: 1. Why do you think Interco is a target of a hostile takeover attempt? 2. Using the discounted cash flow valuation methodology, what is your own estimate of Interco’s per share value? Be explicit about your target per share valuation. In preparing your numbers, consider the analysis summarized in Exhibit 12. Are the assumptions therein presented reasonable? Would you modify them in any way? 3. Does Wasserstein, Perella and Co. have an incentive to give a biased estimate of the value of Interco? Data: You can download Interco’s cash-flow projections implicit in Exhibit 12 from the course website. Hint: To estimate Interco’s DCF value, you will need an estimate for the discount rate. As discussed in class, the discount rate should compensate investors for
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