When do we use the following formula's in a question
FCF1/WACC-g
and FCFE(NET)(1+G)/KE-G
I also have the following question from Kaplan textbook, separate following acquisitions into type 1, type 2 and 3 based on the data provided below:
Acquiring company target company business impact on acquirer's capital structure
asset beta 0.8 asset beta 0.95 Financed by new debenture issue
Electrical wholesaler Electronic Wholesaler paper mill Finance raised in long term
gearing ratio
Paper mill Paper mill Finance raised by issue of new
equity
Travel consultancy Cottage rental Finance raised in long term
gearing ratio
What type of acquisition would be the travel consultancy and Electrical Wholesaler be classified as? I know that the business risk changes in travel consultancy, but does the Financial risk change as well, so would this be classified as a type 3 acquisition?