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Homework answers / question archive / 17) The implied enterprise value of Snap Inc

17) The implied enterprise value of Snap Inc

Finance

17) The implied enterprise value of Snap Inc., calculated using the assumptions and acquisitior premium provided, is: $30,498 $92,661 $91,669 $92,165 Acquisition of Snap by Amazon 20% 5% Acquisition Structure Assumptions Acquisition Premium Equity Issuance Discount (to Current Price) % Debt Financing % Equity Financing 20% 80% Acquirer and Target Assumptions Share Price ($/sh.) Fully Diluted Shares Outstanding (MM) Net Debt FY+ 1 Normalized Net Earnings FY+ 1 Normalized Cash Flow Amazon Acquirer $3,099.40 518 $66,884 $23,688 $69,825 Snap Target $44.29 1,734 -$496 -$581 $334 Pro Forma Adjustment FY+ 1 Normalized Net Earnings FY+ 1 Normalized Cash Flow Pro-Forma Net Debt $3,134 $642 $85,595

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Hence, the correct answer is the third option showing 91,669.

Data for Snap Inc.

Share Price, P = 44.29

Premium on acquisition, p = 20%

Hence, effective share price for acquisition, P* = P x (1 + p) = 44.29 x (1 + 20%) = $ 53.15

Number of shares outstanding, N = 1,734 MM

Equity value, E = P* x N = 53.15 x 1,734 = $ 92,158.63 MM

Net Debt, D = - 496

Hence, the implied enterprise value = Equity value + net debt = E + D = 92,158.63 + (- 496) = 92,158.63 - 496 = $ 91,662.63 MM

The nearest answer is the third option showing 91,669. Hence, the correct answer is the third option showing 91,669.