Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. robert , the ceo of zygot corporation believes tha

Robert , the CEO of Zygot Corporation believes that the company is undervalued and is...

60.1K

Verified Solution

Question

Accounting

Robert , the CEO of Zygot Corporation believes that the company is undervalued and is subject to a takeover by Rystop Cable Company. He has requested the CFO to determine the value of the firm to appropriately advise the Board. The relevant information to be used in the calculations are as follows:

Year

1

$5

2.

$10

n

$7

4

$9

Pre-tax cash flows (millions)

Current beta

1.2

Post merger beta

1.5

Number of outstanding shares (millions). 10

Tax rate

Risk-free rate

20%

Market risk premium

7%

Terminal growth of cash flow

6%

for year 5 and beyond

6%

Zygot is debt free and has no preferred stock outstanding. Rystop makes a cash offer of $6.50* per share for the company.

a. Calculate the net (after tax) cash flow for each year excluding the terminal value.

b. What is the terminal value?

c. What is the value of Zygot using the discounted cash flow analysis?

d.Should Zygot shareholders accept Rystop offer? Explain

e.If management is hostile to the takeover, what advice would you give to Rystop?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Statistics
1.2K views

files Tab Window Help New Ta XV CUNY X ke launch jsp course assessment id...

Statistics
1.2K views

The accompanying data are the length in centimeters and girth’s in centimeter of 12 habor seals find...

Operations Management
1.2K views

Tasty meal is one of the largest foodservice retailer having more than 200 restaurants across country....

Physics
1.2K views

Radius of Moon's orbit is 240000 miles and period of revolution is 27 days, diameter of...

Biology
1.2K views

Why would satellite imagery be more useful than a map in some instances?a) provides landmarks,...

Physics
1.2K views

A current carrying closed loop in the form of a right angle isosceles triangle ABC...

Algebra
1.2K views

Given h x 4x 10 calculate h 2 18 03 02

Algebra
1.2K views

7 In a recent survey of some people 333 of them were women 432 of...

Accounting
1.2K views

a. Wharinin purtand en acmurt, ipe1,300. Aeculred:

Accounting
1.2K views

Exercise 10-42(Algo) Activity-Based Budgeting (ABB) with Continuous Improvement [LO 10-6,10-7] OFC Company has...

Accounting
1.2K views

A small store's profit this month is P^(1) 100. It was a breakthrough since they...

Accounting
1.2K views

At 31 December 208, Northern Resources Ltd. reports the following on its statement of financial...