An English-language PDF of this Brief Case in an academic course pack will allow the students with the opportunity to buy an audio form as well. In January 2007, West Coast Fashions, Inc., a huge designer and promoter of branded clothes, made public a strategic restructuring that would lead to the divestiture of their completely owned footwear subauxillarysidiary, Mercury Athletic. John Liedtke, the manager of business development for Active Gear, a well-off athletic and casual footwear firm, viewed the possible purchase of Mercury as an exclusive chance to approximately increase his business size to double. The case utilizes the possible purchase Mercury Athletic as a tool to instructstudentsfundamental DCF (discounted cash flow) valuation with the use of the weighted average cost of capital (WACC). Debt-Free Cash Flow Projections, Terminal Values, Non-operating Assets, Valuation, Operating Projections, Enterprise and Equity Value, Sensitivity Analysis, Acquisition, Weighted Average Cost of Capital, United States, Footwear, Athletic Apparel, Footwear.
Base Case Projected Segment Performance ($ in thousands)
Projection of Selected Balance Sheet Accounts, 2007-2011 ($ in thousands)
Growth rate Comparision
Cost Of Capital Calculations
Asset Beta Calculations
Beta of Companies with similar Debt/Equity
Cash Flow and Opertiang Assumptions
Cash Flow Analysis
Terminal Value Calculations
Net Cash Flow growth Rate
Enterprise Value Calculations
Acquisition Price and NPV
Is Mercury an appropriate target for AGI?
Review the projections formulated by Liedtke. Are they appropriate? How would you recommend modifying them?
Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections. Be prepared to defend additional assumptions you make?
Do you regard the value you obtained as conservative or aggressive? Why?
How would you analyze the possible synergies or other sources of value not reflected in Liedtke’s base case assumptions?