Mercury athletic footwear case essay

At the opposite end, if the WACC we calculated was higher than it actually will be, then our value will increase based on the growth rate. One is that AGI is smaller than other rivals.

Mercury footwear

Typically its assumed businesses will continue on in perpetuity unless information relevant to future revenue projections and returns are available. The value we got can be considered a conservative estimate. Even though this acquisition may not generate any amount of money for example, which is not the case for AGI and Mercury. In the process of using discount rate we believe we utilize the time value of money; this concept is used, when for example a company makes an investment. Do you regard the value you obtained as conservative or aggressive? It is important to look at it because it is a measure that investors can use to evaluate the financial health of the company. It is sold in department stores, specialty retailers, wholesalers and independent distributors.

Net Working Capital — Capital Expenditures. The footwear industry is very competitive, with low growth and stable profit margins.

Mercury athletic footwear case essay

Besides that it would increase revenue, boost the capacity utilization and expand itself to a bigger numbers of retailers and distributors and increase the leverage with the manufacturers, the more leverage AGI has the more likely it can make money. Taking the Total Discounted cash flow minus the acquisition price will gives us the NVP, which as mentioned above will be the amount that needs to be paid up front. Knowing that we will know if the acquisition should be undertaken. The combined company would be able to combined the logistics for both company, decreasing overhead and possibly offer more efficient distribution and logistic support. We have made two other scenarios one with a lower discount rate then the 7. There are four chief grounds back uping this acquisition. Analysis: In order for Liedtke to get a broader picture on the acquisition of Mercury, he needs to compare and analyze a list of financial data from to ; projected balance sheet accounts, operating results and free cash flows, and cost of capital calculations. Do you regard the value you obtained as conservative or aggressive?

Estimation of the free cash flows from to 5 c. Synergies discussed above will potentially add value to the acquisition. The discount rate is an interest rate that is used for calculating the present value of future cash flows.

mercury athletic footwear case solution course hero

Reasons why Mercury is an appropriate target for AGI 4 2. We use CAPM method to calculate the cost of equity. Therefore, Liedtke believes that if they takeover Mercury will double AGIs revenue, increase its leverage with contract manufactures and expand its presence with key retailers and distributions.

Therefore, the cost of equity is

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Mercury Athletic Case Essay Example