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Corporate Finance

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Corporate Finance

download word file, 2 pages (22KB)

General Topic: Business - Case Studies
Citation Style: APA
Sources: 0
Views: 94
Words: 557
Pages: 2
Paper #: 46523165

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As a standalone operation, Eskimo Pie earns $0.76 per share, which taken on time equals to $9.50, which when multiplied by the number of shares outstanding is $31.5 million. What this indicates is that based strictly on the companys earnings, the company is worth significantly less than what Nestle is offering. Using 8% as the discount rate, the firms estimated future cash flows are worth nowhere near the $61 million that Nestle is offering they may be worth half that at best

For the existing shareholder, it is better to accept Nestles offer. This offer attaches the best value to the company. The Nestle offer is higher than the companys book value, and it is higher than the expected value of the company at present. Indeed, the Nestle offer is nearly double the reasonable value of the company. This is because unlike an independent investor, Nestle would see operational synergies from this acquisition......

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