Advanced Topics in Corporate Finance
the value of Pinkerton’s to Wathen. Use a discounted cash flow approach
. 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%.
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