Flinder Valves Case Study

FIN 465, Fall 2010-11 PROJECT # 3, FLINDER VALVES AND CONTROLS CASE STUDY

In this project, you will estimate the value of a target company in an acquisition and propose a range of exchange ratios acceptable for the target and the acquirer. Please find the full assignment below. You can use only Excel for all calculations. You can use Word for a write-up. There is no limit on the length of the write-up, but I ask you to be concise. Please annotate your Excel calculations so that I can understand them.

You can work individually or in couples (groups of two) on this project. Please write the names of group members in the top left corner of the first worksheet in your spreadsheet. The project counts for 15% of your grade. Each student in the group will receive the same grade. The project will be graded based on the quality of your analysis and the use of Excel. The due date is Wednesday, October 27. Please upload the completed assignment file or files to the Blackboard by the end of the due date. Please name your submitted files as “Yourlastnames _Project3.xls” and “Yourlastnames _Project3.doc”.

ASSIGNMENT:

Assume that you are employed by RSE’s financial department and that you are charged with performing financial analysis of the merger with FVC. You are given the data that are included as Exhibits 1 through 10 in the case study. Your tasks are as follows.

1. Estimate the value of FVC to RSE using the discounted cash flow (DCF) valuation method discussed in class. Your estimates should include: expected future free cash flows to the firm (FFCF), weighted average cost of capital (WACC), terminal value, enterprise value, value of non-operating assets, firm value, equity value, and share value. Assume that the terminal growth rate of about 6% is appropriate but do a sensitivity analysis to the changes in the terminal growth rate and the WACC. How does a change in the terminal growth rate by 0.5% or 1% affect the share value? How...