Cigno Co

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September 4, 2019 at 11:28 am #544675
toushiga
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Hello Sir, For PYQ Sep/Dec 2015 Q1

Why the Anatra Co using the combined company cost of capital to calculate the value for the medical R&D business? But the answer is not to calculate the combined company free cash flows but for the total value of Anatra Co? I don’t understand the logic behind,please advise me, Thank you.
September 4, 2019 at 12:27 pm #544713
John Moffat
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They are unbundling manufacturing and all their business will be medical.
The question tells you how to calculate the new WACC that will apply to the future flows.
September 13, 2019 at 11:31 am #546012
toushiga
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But Why the answer write” Total value of Anatra Co following unbundling of equipment manufacturing business and absorbing medical R&D business”?
Should It be Cigco? as it’s them acquire Anatra Co?

Thank you.
September 13, 2019 at 1:22 pm #546025
John Moffat
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The question wants to know how much benefit goes to Cigno’s shareholders.

The answer calculates the value of Anatra and subtracts from that the amount that will have to be paid to Anatra’s shareholders. What is left is the benefit that will go to Cigno’s shareholders.
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