EBIT(1-T) 28,203 31,822 34,563 37,012 38,767 The valuations differ significantly, because the DCF method is based on a number of assumptions, including the assumption related to the future revenue growth rates, future tax rate, terminal growth rate of 4%, and the calculation of the weighted average cost of capital in which the calculation of the re-levered beta is again based on the values of the comparable companies. Your name. 2006 2007 2008 2009 2010 2011 If the women’s line of business of Mercury is continued and incorporated in the valuation then it could increase the total enterprise. Market index is the representation of systematic risk. These expenditures have then been subtracted with their incremental effect over the years and the final free cash flow is calculated. 4. Further, it has been assumed that after the year 2011, for 2012 and on wards the cash flows are going to be sustainable and grow at the same rate. EBIT(1-T) 28,367 31,106 35,073 39,546 44,590 On the other hand, the multiple method is based on actual values of the year 2006. Shipments of the COVID-19 vaccine are arriving, with frontline health care workers getting immunized — some for the cameras — across the United States Monday. Q3) Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections. Terminal Value 403,250 The revenue growth rate has been assumed based upon certain assumptions. Synergies Mercury Athletic Valuation Liedke's Projections Women's Casual Division Incorporating the loss from discontinuing the women's casual line Display a higher degree of detail Operating expense increase from 2006 to Are they appropriate? The intended purpose of calculating the market premium is to estimate the additional risk or cost between the … Mercury Athletic Footwear Case Solution. Home >> Operations Management Case Studies >> Mercury Athletic Footwear. Mercury Athletic Footwear: Valuing the opportunity Case Solution. Actual Home » Case Study Analysis Solutions » Mercury Athletic Footwear. Partnerships could be formed with the suppliers of AGI and better terms could be agreed upon. The intended purpose of calculating the market premium is to estimate the additional risk or cost between the market risk and the risk free rate. Mercury Athletic Footwear: Valuing Opportunity Case Summary: John Liedtke, head of business development for Active Gear Inc. (AGI), is evaluating the acquisition of Mercury Athletic (Luehrman & Hielprin, 2009). AGI was founded in 1956 and started off by producing high quality specialty shoes for golf and tennis players. Mercury Athletic Footwear: Valuing the Opportunity Case Solution. The case utilizes the possible purchase Mercury Athletic as a tool to instructstudentsfundamental DCF (discounted cash flow) valuation with the use of the weighted average cost of capital (WACC). The overhead costs after both the companies merge would be reduced significantly. Mercury...appropriate target? The valuation for Mercury Athletic Footwear has been performed by two different method. Mercury Athletic Footwear Case Study John Liedtke head of Active Gear, Inc. (AGI) is contemplating whether to invest in Mercury Athletic a subsidiary of West Coast Fashions (WCF). Op Cash Flows 37,790 41,602 45,206 48,418 50,721 WCF wanted to dispose off this segment. Please place the order on the website to order your own originally done case solution. SECURE STACKS. How to increase brand awareness through consistency; Dec. 11, 2020. In January 2007, West Coast Fashions, Inc., a large designer and marketer of branded apparel, announced a strategic reorganization that would result in the divestiture of their wholly owned footwear subsidiary, Mercury Athletic. Please place the order on the website to get your own originally done case solutiona, Mercury Athletic Footwear: Valuing the Opportunity, Mercury Athletic Footwear: Valuing the opportunity, Newmont Mining Corp. and a Mercury Spill in Peru (A), Merrill Lynch’s Acquisition of Mercury Asset Management, Valuing a Business Acquisition Opportunity, Mercury Athletic: Valuing the Opportunity, CASE ANALYSIS: MERCURY ATHLETICS FOOTWEAR: VALUING THE OPPORTUNITY, Newmont Mining Corp. and a Mercury Spill in Peru (B), Engineering Management Case Study Examples With Solution. case solution for mercury athletic: valuing the opportunity Dear Students, Our tutors are available 24/7 to assist in your academic stuff, Our Professional writers are ready to serve you in services you need. Mercury Athletic Case. This is the reason due to which both the valuation figures differ significantly. Blog. The integration of both the companies would be considered as a horizontal integration since both of them belong to the same industry (i.e. MA had revenues of $431.1M and an EBITDA of $51.8M FCF 7,049 21,305 24,022 27,086 30,540 WC 104,117 124,791 140,707 158,652 178,886 201,701 Liendke’s 2007 projected EBIT reflects a conservative increase in EBIT of 9% compared to the average industry growth rate of 10%. If we look at the valuation of Mercury for the part D and part F, then a difference could be seen between the enterprise values. Based On Historical Information Op Cash Flows 37,259 42,597 48,029 54,155 61,061 For making a decision regarding the acquisition being appropriate or not, the facts and side effects of acquisition should be considered first. Mercury Athletic Footwear: Valuing the Opportunity Active Gear, Inc. (AGI) is a privately held footwear company and is contemplating the possibility of acquiring Mercury Athletic Footwear.West Coast Fashions Inc., a large designer and marketer of men’s and women’s branded apparel recently announced that it plans to shed its Mercury Athletic Footwear subsidiary. - Inhouse team of MBAs and CFAs (not reliant on freelancers), We are the Number 1 Case Study Solution Provider In the Case Study Help Niche, Transland Shipping: Dealing with Cross-Border Logistics Barrier, The Evolution of the Circus Industry (A) (Japanese) Japanese, The Clorox Company: Leveraging Green For Growth, Fostering an Ethical Organization From the Bottom Up and the Outside In, Banyan Tree Resorts and Hotels: Building an International Brand From an Asian Base, Laidlaw: The Resignation of James R. Bullock, Process Reengineering in Emerging Markets: An Automaker's Experience (B), Working Together Effectively Before It All Goes Downhill, Collective Bargaining and Negotiation at the University of Regina: General Overview and Private Information - Faculty, When the distribution network of both the companies would be combined, then. Mercury Athletic: Valuing the Opportunity Case Study Solution. MGMT S-2720 Assignment 1: Mercury Athletic Footwear Questions: 1. Therefore, the market risk premium in this case is only a representation of the possible expected return, and is not a calculation of risk. Theprice per earnings ratio comes from a comparable footwear company in Exhibit 3. However, the highest value for the enterprise has been calculated by the discounted cash flow method. Mercury Athletic Footwear: Valuing the Opportunity Team 10 / Mergers and Acquisitions West Coast Fashions, Inc (WCF) was a large business, which dealt with men’s and women’s apparel. Case Solution for Mercury Athletic: Valuing the Opportunity. Active Gear Incorporated’s (AGI) profits have been under pressure lately because of their smaller size and their limited buying power and customer base. If the days sales in inventory is reduced, then the working capital might materialize for the company. In order to summarize, due to AGI’s small size, there is a strong risk of being overtaken by the other giant players in the market therefore, if it acquires Mercury, the risk will be minimized and there is a strong opportunity that the company will grow steadily. How would you recommend modifying them? Net FCF 7,049 21,305 24,022 27,086 433,790 Tax rate has also been assumed for the future years and deducted from profit before tax. If we look at the valuation of Mercury for the part D and part F, then a difference could be seen between the enterprise values. Luehrman, Timothy A., and Joel L. Heilprin. Mercury Athletic Footwear Case DCF VALUATION ANALYSIS Jianqiu … FCF 21,240 26,727 22,097 25,473 29,545 mercury athletic footwear case solution - Free download as Word Doc (.doc / .docx), PDF File (.pdf), Text File (.txt) or read online for free. Along with this, if the women’s line is continued then the revenue growth rate could be increased by 3% and the EBIT margin could be increased to 9%. View Mercury Athletic Footwear Case from BUFN 750 at University of Maryland, College Park. 2. Review the projections by Liedtke. Under this method the revenues for all the future years from 2007 to 2011 have been calculated. Reason. Mercury Athletic Case . 1. Email us directly at: casesolutionsavailable(at)gmail(dot)com Please replace (at) by Thisprice per earnings ratio is used because it is the closest number that can match the marketview of Mercury Athletic. The industry is same, products are similar, markets are similar, greater ability to merge each other’s operating efficiencies and improve deficiencies, therefore it is evident that these factors confirm that Mercury is … Subject: Valuation of Mercury Athletic Footwear. Corporate overhead costs are cash charges therefore they have not been added back. If the days sales in inventory is decreased, then extra revenue could be generated which could be computed with inventory turnover ratio for all the future years. Enterprise Value 319,103, Based On Case Projection In an attempt to be fair to one division winner, the Pac-12 has placed its highest-ranked and only undefeated team in a potentially difficult situation ahead of … Mercury was purchased by WCF in hopes to increase business revenue however this was not the case. EBIT 47,279 51,843 58,455 65,911 74,317 Mercury Athletic: Valuing the Opportunity is a Harvard Business (HBR) Case Study on Finance & Accounting , Fern Fort University provides HBR case study assignment help for just $11. Harvard Business Case Studies Solutions - Assignment Help. CAPEX 9,536 5,376 6,062 6,835 7,707 An assumption we also point out as possibly manipulating the calculated value is the assumption of 3% revenue growth. Debt-Free Cash Flow Projections, Terminal Values, Non-operating Assets, Valuation, Operating Projections, Enterprise and Equity Value, Sensitivity Analysis, Acquisition, Weighted Average Cost of Capital, United States, Footwear, Athletic Apparel… That constant growth rate has been calculated based on the average growth rate of the total assets of the company from 2006 to 2011. In this case, the cashinflow is the acquisition price, which used to purchase the Mercury Corporation. The most important of these synergies are: With the available information, the calculation could be performed for the reduction in days sales in inventory. Valuation of the Company case study document for mercury case Is Mercury an appropriate target for AGI? Top 10 blogs in 2020 for remote teaching and learning; Dec. 11, 2020 Email. Mercury Financial Valuation Case 2183 Words | 9 Pages. Mercury Athletic was purchased by WCF from its founder Daniel Fiore. Our case solution is based on Case Study Method expertise & … It’s simple to recognize decent dialogue when you hear it. 8%. 4 a. Estimation of the weighted average cost of capital 5 b. Harvard Business School Brief Case 094-050, September 2009. This price per earnings ratio is used because it is the closest number that can match the market view of Mercury Athletic. Description. Mercury athletic footwear Group 7 Contents Executive Summary & Overview of Problems 3 Analysis on Mercury acquisition 4 1. Analysis Mercury Athletic’s EBIT margin for 2006 was 9. Mercury Background 2003 - acquired by West Coast Fashions (WCF) Attempted brand extension through apparel line Business stalled Mercury CEO eager to return exclusively to footwear Four footwear product lines Men’s/Women’s athletic Men’s/Women’s casual 2006: Revenue - $431.1 million EBITDA - $51.8 million Conservative or Aggressive? Investment in WC 20,674 15,916 17,945 20,234 22,815 Such a move would result in divesting the corporation of its hold over Mercury Athletic, a wholly-owned footwear subsidiary. The last page of the Mercury Athletic case mentions at least two possible sources of value creation not captured in Liedtke’s base case scenario: a significant reduction in Mercury’s days sales in inventory (DSI) and a possible combination of Mercury’s and … "Mercury Athletic: Valuing the Opportunity." Based on the information given in the case, Liendke’s EBIT projections for 2007 through 2011 reflect an accurate growth in earnings for Mercury Athletic. Investment in WC 4,567 2,649 9,805 8,687 6,233 footwear). Mercury Athletic Footwear: Valuing the Opportunity Case Solution communicate just what they need to say and tell readers precisely what they’re likely to do. ACTIVE GEAR COST OF CAPITAL ASSUMPTION Tax Rate Cost of Debt Risk Free Rate Expected Market Return Market Risk Premium Asset ?eta Debt-to-Value Ratio Debt-to-Equity Ratio Equity Beta 40.0% 6.00% 4.93% 10.43% 5.50% 20.0% 25.0% 0.970 Mercury Athletic: Valuing the Opportunity – Case Solution West Coast Fashions, Inc. was planning a reorganization. Would result in divesting the corporation of its hold over Mercury Athletic Footwear Case Solution possibly... Would result in divesting the corporation of its hold over Mercury Athletic the year 2006 business. 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