P&G has provided you with a projection of their Base Case EBITDA forecast:
2021: $50M 2023: $60M 2025: $64M
2022: $55M 2024: $62M
With the help of Scott division management, you have identified potential revenue synergies of $8M per year and cost synergies of $7M per year, upon integrating Bounty into the operation.
Using the Discounted Cash Flow model, should you recommend buying Bounty? Use the following assumptions: 1) P&G will sell for a small 15% premium over the Base Value and 2) your discount rate (weighted average cost of capital or WACC) = 10% Show your math below. Ignore perpetuity value (value after year 5)
Base Case Value of Bounty=
Price to be paid to P&G=
Value to Kimberly-Clark of Bounty=
Potential ROI of Buying Bounty=
