So we would recommend that oracle should buy sun

This preview shows page 3 - 6 out of 6 pages.

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 targeting Sun Microsystems.
DCF Method Cost of Equity Risk Free Rate 0.0366 Risk Premium 0.1 Beta 1.73 Cost of Equity 0.15 Cost of Debt Cost of Debt 0.1142 D(1-t) 0.082 WACC Debt (in millions) 1257 Equity (in millions) 4941 Enterprise Value 6198 D/V 0.20280735 7 E/V 0.79719264 3 WACC 0.13 2009E 2010E 2011E 2012E 2013E 2014E Net Revenue 11,449 12,665 13,047 13,526 13,885 14,243 Cost of Sales 6,718 7,685 7,583 7,735 7,889 8,075
Gross Margin 4,731 4,980 5,464 5,791 5,996 6,168 S,G&A 3,461 R&D 1,648 Impairment of Goodwill 1,460 Other Operating Expenses 398 Total Operating Expenses 6,967 4,839 4,992 5,121 5,249 5,372 Operating Income (2,236) 141 472 670 747 796 EBIT (4,472) 282 944 1,340 1,494 1,592 Taxes 1,278.9 9 80.65 269.98 383.24 427.28 455.31 NOPAT - 3,193.01 201.35 674.02 956.76 1,066.72 1,136.69 Add: Dep & Amortization 474 536 456 470 487 500 Less: CAPEX 645 268 502 527 530 543 Less: Increase in NWC -1328 153.6714 48.27625 60.51638 45.3008 45.09746 FCF - 2,036.50 315.28 579.74 839.44 978.52 1,048.79 1,075.0 1 10004.59999 Terminal Value 11,053.39 DCF - 1,802.21 246.9078236 401.7887278 514.846493 531.0988473 5309.148263 Total DCF 5201.581305 Outstanding Shares 739 Value per Share 7.03867565 CAPEX 2009 2010 2011 2012 2013 2014 New PPE 1788 1520 1566 1623 1666 1709 Less Old PPE 1616 1788 1520 1566 1623 1666 Add Dep 473.488 536.4 456 469.8 486.9 499.8 CapEx 645.488 268.4 502 526.8 529.9 542.8 Change in NWC 2007 2008 2009 2010 2011 2012 2013 2014
NWC 5237 2775 1447 1600.67 1 1648.94 8 1709.464 1754.76 5 1799.86 2 Sales Growth - 0.00050 4 -0.175 0.1062 0.03016 0.0367 0.0265 0.0257 Change in NWC -2462 -1328 153.671 4 48.2762 5 60.51638 45.3008 45.0974 6

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture