Once having identified and screened the proposed acquisition targets through a Payback analysis the next step is to Identify a net present value of the acquisitions based on the information provided. . In order to calculate the net present value in relation to each of the selected proposals the organization requires a minimum of the weighted average cost of Capital plus a risk premium 2%. This will satisfy shareholders return in Geneva. Details of the Capital structure of the GTG is as follows. 3. Prepare a board report the directors can review which highlights your recommendation based on your calculations. In addition, raise any concerns you may have other than quantitative analysis. Financing type Market value 000’s cost Share $5,000 9% Debt $20,000 5.5%
Appendix 1 – ACQUISITION PROPOSAL 1 NAME; MEDLAB AUCKLAND LOCATION;
10 Grafton St, Auckland The initial discussions have been undertaken with the owner doctors under a strict confidentiality agreement. Information regarding MA has been summarized below. Interestingly the owner doctors approached senior staff at GTG initiating discussions regarding a potential sale.
BACKGROUND The company was founded by three doctors/pathologists and has been in operation for 15 years. The organisation which trades as a company has developed significant goodwill over time. Unfortunately, the main laboratory premises have become run down and the collection rooms have deteriorated and complaints about the nurses performing the sampling were growing. The industry is capital intensive in terms of the development of new technology and diagnostic equipment. The following information was based on the 2020 data.
Number of staff (including collection nurses) 150 Owner Doctors 3 Pathologists 6 Collection centers 15 Average number of customers/patients per annuum 25,000 Average tests per patient 2.3 Average revenue per test $45 FINANCIAL DATA Overall, the company based on initial discussions has been performing well, however market share is lower compared to its main competitor. The following forecast of data has been provided by the company and has been set out below. Notes; 1. The tax rate is 30% for the organisation
FINANCIAL DATA
Overall, the company based on initial discussions has been performing well, however market share is lower compared to its main competitor.
The following forecast of data has been provided by the company and has been set out below.
Notes;
1. The tax rate is 30% for the organisation
|
2021
|
2022 |
2023 |
|
|
Revenue |
$ 2,500,000 |
$ 2,800,000 |
$ 3,100,000 |
|
Operating Expenses |
$ 2,100,000 |
$ 2,300,000 |
$ 2,450,000 |
|
EBITDA |
$ 400,000 |
$ 500,000 |
$ 650,000 |
|
Deprecation and Amortisation included in expenses |
$ 150,000.00 |
$ 130,000.00 |
$ 110,000.00 |
calculation of NPV and WACC
