Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 50

Business Valuation Refer to the information in Problem 20-47.
Required
1. Develop a business valuation for 2013 using the market value method, the book value method, and the multiples-based methods.
2. Determine an estimated value for BPP using the discounted free cash flow method, assuming that the 2013 amount of free cash flow continues indefinitely.
3. Which of the methods would you use and why
4. Is the GSI offer a good one Why or why not
5. What would be the effect of sustainability issues, if any, in the acquisition BPP by GSI
Reference:
Business Analysis Brooks Plumbing Products, Inc. (BPP) manufactures plumbing fixtures and other home improvement products that are sold in Home Depot and Walmart as well as hardware stores. BPP has a solid reputation for providing value products, good quality, and a good price. The company has been approached by an investment banking firm representing a third company, Garden Specialties Inc. (GSI), that is interested in acquiring BPP. The acquiring firm (GSI) is a retailer of garden supplies; it sees the potential synergies of the combined firm and is willing to pay BPP shareholders $38 cash per share for their stock, which is greater than the current stock price; the stock has traded at about $35 in recent months. Summary financial information about BPP follows.
Required Evaluate BPP as a company using financial ratio analysis. Since the calculation of some ratios requires the averaging of balances, you may assume that the balances in 2011 are the same as those in 2012.