The key components of a merger and acquisition strategy

XYZ Corporation, Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$15 million (negative), but its FCF at t = 2 will be $42 million. After Year 2, FCF is expected to grow at a constant rate of 5% forever.

If the weighted average cost of capital is 11%, what is the firm’s value of operations, in millions?

Suppose that the company pays out 30% of earnings as dividends. Find its growth rate in dividends if the Return on Equity is 8%2. Using Gordon’s model what is the most you would pay for a stock with the current dividend of $2.50 per share and the predicted growth of 4% per year? Your required rate of return is 7%.

A certain stock is currently trading for $46 per share. The prices of various American call options on this stock are shown below. All calls expire in three months. One of these options is definitely mispriced. Which one, and how do you know?Strike Call price40.00 5.8942.50 4.3745.00 2.6247.50 1.39

Write a three page paper with regard to the key components of a merger and acquisition strategy as well as the key principles needed to complete a merger and acquisition.


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