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in CIGNO CO (SEP/DEC15)
1. why do we need to combine both to get 0.71 ????, since we are only valuing Anatra Co, shouldn’t we suppose to use only beta equity of Anatra Co ??? not combining with Cigno Co ?
We are not valuing Anatra in isolation. We are asked for the value attributable to Cigno’s shareholders from the acquisition, and the acquisition will change the cost of capital (as stated in the question) and will change to the total cash flows due to synergy benefits – both of these will affect the value of the company after the acquisition.
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