Why has the Private Equity firm decided to sell this business?
- What problems did you find with management’s estimated numbers and assumptions used in the forecast for the years beyond 2016.
- If you entered negotiations to buy this business, what would be the most you would pay for the net assets. You need to explain why you would pay this amount.
- If Wells Fargo was willing to fund the entire acquisition, how much would you have to borrow to buy the business, and then, operate it. (HINT: Use the results of your ratio analysis to determine the operating requirements.)
- A. Use the information you noted in your response to questions #2 and #4 above and prepare a revised 2017 income statement correcting the seller’s errors and reflecting your more realistic assumptions for business performance.
- Based on your answer to #5A, would the business generate enough cash to repay the loan to Wells Fargo by the end of the seven year loan agreement?
Calculate the financial ratios to help you answer the following case questionsGROWTHP/E ratio = Price of share/ Earning per share=Total fair value of the business/ Stand alone adjustedEBITDA= P/B ratio= Fair value of the business/Book value of the business=PROFITABILITYGross Profit rate = Return on Asset = Stand alone adjusted EBITDA/ Average total assetASSET EFFICIENCYDays inventory outstanding=365*average inventory/cost of goods sold=365*(Days sales outstanding=365*average net receivable/total net sales365*(
Excel questions are imporatant
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