Pinkerton (A) - Assignment and Questions for Consideration.pdf

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Advanced Topics in Corporate Finance Erez Levy 1 Pinkerton (A) Assignment questions: 1) Estimate the value of Pinkerton’s to Wathen. Use a discounted cash flow approach (not multiples) . The case presents forecasts for the “expected” scenario as well as for a “pessimistic” scenario. Use the “expected” scen ario to forecast expected cash flows. Assume that the cost of unlevered equity is 15%. 2) Suppose Wathen proceeds with the acquisition of Pinkerton’s. Which financing alternative do you recommend? Explain why and provide the necessary calculations to back up your recommendation. Note: if your valuation for Pinkerton’s is below $100 million, assume American Brands will lower the price. In other words, irrespective of your answer to question #1, address this

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