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So we would recommend that Oracle should buy Sun Microsystems.Furthermore, the high price paid by Oracle i.e. $9.5 per share is justified by the synergies what would be created by this acquisition and also taking into consideration that IBM which is one of the its main competitor is also targetingSun Microsystems.
DCF Method Cost of EquityRisk Free Rate0.0366Risk Premium0.1Beta1.73Cost of Equity0.15Cost of DebtCost of Debt0.1142D(1-t)0.082WACCDebt (in millions)1257Equity (in millions)4941Enterprise Value6198D/V0.202807357E/V0.797192643WACC0.132009E2010E2011E2012E2013E2014ENet Revenue11,449 12,665 13,047 13,526 13,885 14,243 Cost of Sales6,718 7,685 7,583 7,735 7,889 8,075