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Manmouth

In: Business and Management

Submitted By apie
Words 409
Pages 2
1. Yes. Robertson Tool Company had been going through a few years of low sales and profit, and, coupled with conservative financial and accounting practices, was far behind the normal growth rate for companies in its industry. Robertson’s 50% control of the market for clamps and vises, along with its good position in the scissors and shears’ $200 million market, let it compliment the diverse holdings of Monmouth. These are attractive attributes of Robertson, but the selling point lies in the distribution network consisting of 2,100 wholesalers and 15,000 retail outlets. The Robertson products are sold in 137 countries worldwide. This avenue to market Monmouth and Robertson products across resources could lead to above average growth and profits.

2. What is the maximum price that Manmouth can afford to pay: a. DCF base: i. WACC 1. Unlevered Equity Beta – 0.725 2. Market Value of Debt - $12m 3. Market Value of Equity - $25,696m 4. Debt/Capital - 32% 5. Levered Equity Beta – 0.86 6. Risk Free Rate – 4.10% 7. MRP – 6% 8. Cost of Equity – 9.28% 9. Cost of Debt – 6.07% on BBB rating 10. Tax Rate - 40% 11. WACC: a. Debt – 31.8% @ 3.64 b. Equity – 68.2% @ 9.28 c. WACC = 7.5 ii. Terminal Value - TY FCF = $4.9m*(1+0)/(0.075-0) = $65.33 iii. FCF: Year 1 Year 2 Year 3 Year 4
0.8 2.4 3.4 4.9+65.33 iv. NPV - b. Market multiples of EBIAT: v. Robertson Too Co – EBIAT - $1,800,000 vi. Average EBIAT multiple – 13.314 vii. Enterprise Value - $23,965,200 viii. DEBT???

3. Estimate a WACC for the acquisition.

Invested Capital | | $37,696,000 | | | |
Debt | |...

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...years of low sales and profit, and, coupled with conservative financial and accounting practices, was far behind the normal growth rate for companies in its industry.   Robertson’s 50% control of the market for clamps and vises, along with its good position in the scissors and shears’ $200 million market, let it compliment the diverse holdings of Monmouth.   These are attractive attributes of Robertson, but the selling point lies in the distribution network consisting of 2,100 wholesalers and 15,000 retail outlets.   The Robertson products are sold in 137 countries worldwide.   This avenue to market Monmouth and Robertson products across resources could lead to above average growth and profits.       2. What is the maximum price that Manmouth can afford to pay:       a. DCF base:         i. WACC             1. Unlevered Equity Beta – 0.725             2. Market Value of Debt - $12m             3. Market Value of Equity - $25,696m             4. Debt/Capital - 32%             5. Levered Equity Beta – 0.86             6. Risk Free Rate – 4.10%             7. MRP – 6%             8. Cost of Equity – 9.28%             9. Cost of Debt – 6.07% on BBB rating             10. Tax Rate - 40%             11. WACC:               a. Debt – 31.8% @   3.64               b. Equity – 68.2% @ 9.28               c. WACC = 7.5         ii. Terminal Value - TY FCF = $4.9m*(1+0)/(0.075-0) = $65.33         iii. FCF: Year 1 Year 2 Year 3 Year 4 0.8 2.4 3.4 4.9+65.33        ......

Words: 299 - Pages: 2