RSM426H1 Lecture Notes - Lecture 5: Basis Of Accounting, Cash Flow, Accrual
11 Feb 2018
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Valerie"s (cid:373)ai(cid:374) o(cid:271)je(cid:272)tives: to acquire a profitable business, to acquire a business with growth potential. Gsla"s opportu(cid:374)ities: good n/i, good mix of cash flow, good historical performance, growth in alarm industry. Gsla" risks: success may be due to gene sekur, competitor providing the alarm system hardware for free, move to elector is locks and personal protection pendants, big player may acquire a competitor. Requirement: valuation fo gsla (attractiveness of shares, gw paid on acquisition, financing: can gsla generate enough cash to offset debt financing. Issue #2: valuation of gsla: estimated value = 5 * n/i, using 2008 n/i is more appropriate, estimate value: ,437,217. Is valerie able to finance the purchase and repay the subsequent loan obligations: alternative 1: not purchase gsla. Loan needed = null: alternative 2: using public shares, cottage, house and bank loan to finance the acquisition, public shares, fmv = k, cost = k.
