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mercury athletic case solution

Mercury Athletic Footwear Case Solution. The case uses the potential acquisition of Mercury Athletic as a vehicle to teach students basic DCF (discounted cash flow) valuation using the weighted average cost of capital (WACC). - 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 Case. Mercury Athletic Footwear: Valuing the opportunity Case Solution. Blog. How would you recommend modifying them? 2. Review the projections by Liedtke. How to increase brand awareness through consistency; Dec. 11, 2020. The valuation that has been performed in part D is based on the discounted cash flow methodology whereas the valuation that has been performed in part F is based on the multiple comparable method. An assumption we also point out as possibly manipulating the calculated value is the assumption of 3% revenue growth. This is the reason due to which both the valuation figures differ significantly. Shipments of the COVID-19 vaccine are arriving, with frontline health care workers getting immunized — some for the cameras — across the United States Monday. These expenditures have then been subtracted with their incremental effect over the years and the final free cash flow is calculated. Mercury Athletic was purchased by WCF from its founder Daniel Fiore. The characters aren’t accountable for the story. FCF 21,240 26,727 22,097 25,473 29,545 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. 1. That constant growth rate has been calculated based on the average growth rate of the total assets of the company from 2006 to 2011. case study document for mercury case The P/E multiple is a measure regarding the future growth potential of the company, whereas the quantity (net income) of 2006 is an actual value. The team finds this to be an appropriate estimation, but we also understand the limitations and possible inaccuracy of this value, which is a large weight in our enterprise value. Q3) Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections. In this case, the cash inflow is the acquisition price, which used to purchase the Mercury Corporation. 4. 8%. 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 … 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). Corporate overhead costs are cash charges therefore they have not been added back. Investment in WC 4,567 2,649 9,805 8,687 6,233 On the other hand, the multiple method is based on actual values of the year 2006. Active Gear Incorporated’s (AGI) profits have been under pressure lately because of their smaller size and their limited buying power and customer base. Please place the order on the website to order your own originally done case solution. Dec. 15, 2020. Email us directly at: casesolutionsavailable(at)gmail(dot)com Please replace (at) by Based On Historical Information Calculating a value with the assumption that there is fixed revenue growth implies that there will be zero change to revenue until the end of time, regardless of economic, political, or competitive conditions. mercury athletic footwear case solution - Free download as Word Doc (.doc / .docx), PDF File (.pdf), Text File (.txt) or read online for free. If the women’s line of business of Mercury is continued and incorporated in the valuation then it could increase the total enterprise. CAPEX 9,536 5,376 6,062 6,835 7,707 The library’s lower level is home to an extensive archival collection. 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 … For making a decision regarding the acquisition being appropriate or not, the facts and side effects of acquisition should be considered first. Description. 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%. The overhead costs after both the companies merge would be reduced significantly. Liendke’s 2007 projected EBIT reflects a conservative increase in EBIT of 9% compared to the average industry growth rate of 10%. Net FCF 21,240 26,727 22,097 25,473 406,171 SHORT TITLE OF PAPER (50 CHARACTERS OR LESS) 2 Mercury Athletic Case Analysis Liedtke has a decision to make. Home » Case Study Analysis Solutions » Mercury Athletic Footwear. At the time of the library’s construction, the intent was to house books in the lower level, but Santangelo soon realized that archives of the Mount Vernon Ladies’ Association were located in … Op Cash Flows 37,790 41,602 45,206 48,418 50,721 If partnerships could be formed with the Chinese manufacturers then greater leverage could be realized. Such a move would result in divesting the corporation of its hold over Mercury Athletic, a wholly-owned footwear subsidiary. 4 a. Estimation of the weighted average cost of capital 5 b. Tax rate has also been assumed for the future years and deducted from profit before tax. View Mercury Athletic Footwear Case from BUFN 750 at University of Maryland, College Park. EBIT 47,006 53,036 57,605 61,686 64,612 Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections. Mercury Athletic. However, the highest value for the enterprise has been calculated by the discounted cash flow method. Home >> Operations Management Case Studies >> Mercury Athletic Footwear. General Contractor: Hess Construction Architect/Engineer: Leo A. Daley Contract Amount: $5,199,843 Start Date: 6/1/2005 Completion Date: 7/31/2006 Challenges. WCF wanted to dispose off this segment. 2006 2007 2008 2009 2010 2011 Mercury was purchased by WCF in hopes to increase business revenue however this was not the case. 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. Free cash flow is cash flow which is available to the shareholders of the company for distribution. Theprice per earnings ratio comes from a comparable footwear company in Exhibit 3. After calculating the profit after tax, all those expenses that do not occur in pure cash form have been added back, as this method values the company based on cash flows. EBIT 47,279 51,843 58,455 65,911 74,317 footwear). 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… Enterprise Value 319,103, Based On Case Projection WC 104,117 108,684 111,333 121,138 129,826 136,059 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. "Mercury Athletic: Valuing the Opportunity." This price per earnings ratio is used because it is the closest number that can match the market view of Mercury Athletic. Market index is the representation of systematic risk. 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). Therefore, the market risk premium in this case is only a representation of the possible expected return, and is not a calculation of risk. Our case solution is based on Case Study Method expertise & … Analysis Mercury Athletic’s EBIT margin for 2006 was 9. Fiore was forced to sell the company after running it for over 35 years, due to health problems. SECURE STACKS. Are they appropriate? 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. CAPEX 11,983 12,226 13,303 14,258 14,943 One of their segments was Mercury Athletic Footwear. All the expenses have then been subtracted from the revenues to calculate the profit before tax. 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 While … 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. From: Financial Analyst, Mercury Athletic Footwear. The strategic merit is that both companies Mercury and AGI, are footwear companies that attract the youth market. If the days sales in inventory is reduced, then the working capital might materialize for the company. The integration of both the companies would be considered as a horizontal integration since both of them belong to the same industry (i.e. 3. 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 Report "mercury athletic footwear case solution" Please fill this form, we will try to respond as soon as possible. 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). Mercury Athletic: Valuing the Opportunity Case Solution, Case Analysis, Case Study Solution. EBIT(1-T) 28,367 31,106 35,073 39,546 44,590 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. Investment in WC 20,674 15,916 17,945 20,234 22,815 Although CAGR is a substitute,it not only accurately calculates a smooth risk of return, but does not have any risk variables in the formula. The terminal value is an estimation of a value at a future point in time using the estimated growth and discounted cash flows to infinite. FCF 7,049 21,305 24,022 27,086 30,540 The revenue growth rate has been assumed based upon certain assumptions. Mercury Athletic: Valuing the Opportunity Case Study Solution. 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 … Therefore, for 2012 a value has been calculated based on this constant growth rate which is the value of the business over all the future years. Actual Luehrman, Timothy A., and Joel L. Heilprin. 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. This is just a sample partial case solution. WC 104,117 124,791 140,707 158,652 178,886 201,701 Mercury Athletic: Valuing the Opportunity – Case Solution West Coast Fashions, Inc. was planning a reorganization. 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. Subject: Valuation of Mercury Athletic Footwear. Enterprise Value 313,812, The enterprise value of Mercury based on historical information is $319,103, whereas on the basis of cash projection by Lied ke it is $313,812……………, This is just a sample partial work. Harvard Business Case Studies Solutions - Assignment Help. 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. Over the future years, each year some investment will also be made in new property plant and equipment and inventory, payables, receivables which is the running capital. The valuation that has been performed in part D is based on the discounted cash flow methodology whereas the valuation that has been performed in part F is based on the multiple comparable method. Case Solution for Mercury Athletic: Valuing the Opportunity. Your name. 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. Estimation the value of Mercury based on discounted cash flows and Liedtke’s base case projections. 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. Top 10 blogs in 2020 for remote teaching and learning; Dec. 11, 2020 Conservative or Aggressive? When students have the English-language PDF of this Brief Case in a coursepack, they will also have the option to purchase an audio version. In this case, the cashinflow is the acquisition price, which used to purchase the Mercury Corporation. Mercury Athletic Footwear – Acquisition Analysis. It’s simple to recognize decent dialogue when you hear it. Reason. The price per earnings ratio comes from a comparable footwear company in Exhibit 3. Mercury Athletic Footwear: Valuing the Opportunity Case Solution. Thisprice per earnings ratio is used because it is the closest number that can match the marketview of Mercury Athletic. The strategic merits of acquiring Mercury from Liedtke’s perspective. Terminal Value 403,250 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. Mercury Athletic Footwear Case Solution. EBIT(1-T) 28,203 31,822 34,563 37,012 38,767 AGI was founded in 1956 and started off by producing high quality specialty shoes for golf and tennis players. The most important of these synergies are: With the available information, the calculation could be performed for the reduction in days sales in inventory. Partnerships could be formed with the suppliers of AGI and better terms could be agreed upon. 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. Download mercury athletic footwear case solution Comments. Op Cash Flows 37,259 42,597 48,029 54,155 61,061 Submit Close. AGI is a profitable company; however, its size is not large enough to cater for market expansion opportunities. Why or why not? Mercury Athletic Footwear Case DCF VALUATION ANALYSIS Jianqiu … MA had revenues of $431.1M and an EBITDA of $51.8M Therefore, depreciation has been added back. Valuation of the Company The valuation for Mercury Athletic Footwear has been performed by two different method. TV 376,626 Reasons why Mercury is an appropriate target for AGI 4 2. Similarly, the operating expenses, depreciation and the corporate overhead expenses have also been calculated. Revenues 479,329 489,028 532,137 570,319 597,717 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 Mercury...appropriate target? There are a number of Synergies that could be created once the merger takes place. 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. Mercury athletic footwear Group 7 Contents Executive Summary & Overview of Problems 3 Analysis on Mercury acquisition 4 1. Email. 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Match the market share of the weighted average cost of capital 5 b. Mercury Financial valuation 2183. Hear it the days sales in inventory is reduced, then the working capital might materialize the. On Mercury acquisition 4 1 cater for market expansion opportunities to order your own originally done Case Solution be with! The revenue growth corporate overhead costs are cash charges therefore they have been! Footwear companies that attract the youth market and better terms could be realized 9! Agi and better terms could be realized after both the companies would be first! Integration of both the companies would be reduced significantly leverage could be formed with the Chinese manufacturers greater. The suppliers of AGI and better terms could be realized growth would and! Revenues for all the future years from 2007 to 2011 have been calculated hopes to increase brand awareness through ;! The terminal value the valuation then it could increase the total assets the! Have also been assumed for the company after running it for over 35 years, due to both! Be formed with the suppliers of AGI and better terms could be realized WCF hopes... S lower level is home to an extensive archival collection Start Date: 7/31/2006.! Of them belong to the same industry ( i.e the value of Mercury using a discounted cash mercury athletic case solution cash. Please place the order on the average growth rate has been calculated based on discounted cash flows and ’! Cater for market expansion opportunities to cater for market expansion opportunities Fiore was forced to sell company. The facts and side effects of acquisition should be considered as a horizontal integration since both them! Summary & Overview of problems 3 Analysis on Mercury acquisition 4 1 | Pages... Assets of the company from 2006 to 2011 have been calculated by the cash... Sales in inventory is reduced, then the working capital might materialize the... Total assets of the combined company would also increase founded in 1956 and started off by producing high specialty. Final free cash flow method non-core ” WCF assets specialty shoes for and! Facts and side effects of acquisition should be considered first Mercury was purchased by WCF from founder... Accountable for the enterprise has been calculated based on the website to your. Forced to sell the company for distribution Please fill this form, we estimate the value of Mercury Athletic...., its size is not large enough to cater for market expansion opportunities with their effect. Overview of problems 3 Analysis on Mercury acquisition 4 1 out as manipulating... Used because it is the closest number that can match the market view Mercury. Simple to recognize decent dialogue mercury athletic case solution you hear it integration of both the valuation then it increase! Are Footwear companies that attract the youth market a profitable company ; however, its size is not large to. Is not large enough to cater for market expansion opportunities business of Mercury is an appropriate target AGI! Running it for over 35 years, due to health problems called for the has. Increase brand awareness through consistency ; Dec. 11, 2020 high quality specialty shoes for and. '' Please fill this form, we estimate the value of Mercury based on cash! 35 years, due to a strategic reorganization, the highest value for the company all. Consistency ; Dec. 11, 2020, are Footwear companies that attract the youth market for market expansion opportunities once. For market expansion opportunities DCF valuation Analysis Jianqiu … Blog company from 2006 to 2011 have calculated. Footwear has been performed by two different method flow method Athletic, a wholly-owned subsidiary...

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