Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Calculating value of company
- This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.
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- June 14, 2016 at 8:20 pm #322943
Dear John,
When provided with the following details, which is the correct method of calculating post aquisition company value? :
Details
-Most recent profit after tax for aquirer and aquirer on their own, pre aquisition
-P/E ratio after aquisition
-Synergy p.a. created from aquisitionI am uncertain if I should use bootstrapping or add synergy onto individual company values pre aquisition
My uncertainty arises because the P/E ratio of joint company post aquisition is LESS than the P/E ratio of the acquiree company on its own. Does it have a bearing on which method I should use the fact that it is less?
Kind regards
June 15, 2016 at 5:42 am #322972You should apply the PE of the joint company to the total earnings of the two companies together with the synergy benefits.
June 15, 2016 at 9:12 am #323007Thanks John. Much appreciated.
June 15, 2016 at 5:01 pm #323059You are welcome 🙂
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