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If your company proceed with the acquisition exercise CADBURY above at N 15 and you acquire 850,000,000 shares of the company, prepare a cash flow analysis based on the following assumption :

The acquisition will be funded through borrowing from bank at an interest rate of 8% per annum.

The share price is expected to perform based on the projected profit for the next five years as follows:

2022 N 633,169,333

2023 N 934,150,250

2024 N 1,359,350,240

2025 N 1,625,350,240

2026 N 1,924,250,250

The Price Earning ratio (PER) is expected to stay constant

Share price will be determined by : Share price = EPS X PER

Cadbury is expected to pay dividend on the shareholders at 6% per annum.

Discount factor will be at the costs of fund which is 8% per annum

The company plan :

To sell 10% of the share after year 3

To sell another 10% at the end of year 5

The rest of the shares will be kept as long term investment

Required :

Prepare a projected cashflow statement showing :

Cash outflow from investment

Cash inflow from the sales of investment

Annual cash inflow from dividend

Calculated the present value of the cash flow

Determine the Net present value of the cashflow

Based on the calculation determine whether the acquisition of the company is viable.

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