mercury athletic case solution

8%. MGMT S-2720 Assignment 1: Mercury Athletic Footwear Questions: 1. Mercury was purchased by WCF in hopes to increase business revenue however this was not the case. Investment in WC 20,674 15,916 17,945 20,234 22,815 Case Solution for Mercury Athletic: Valuing the Opportunity. 2006 2007 2008 2009 2010 2011 Similarly, the operating expenses, depreciation and the corporate overhead expenses have also been calculated. If the women’s line of business of Mercury is continued and incorporated in the valuation then it could increase the total enterprise. mercury athletic footwear case solution - Free download as Word Doc (.doc / .docx), PDF File (.pdf), Text File (.txt) or read online for free. The library’s lower level is home to an extensive archival collection. Mercury Athletic: Valuing the Opportunity Case Solution, Case Analysis, Case Study Solution. How to increase brand awareness through consistency; Dec. 11, 2020. 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. Liendke’s 2007 projected EBIT reflects a conservative increase in EBIT of 9% compared to the average industry growth rate of 10%. EBIT(1-T) 28,203 31,822 34,563 37,012 38,767 EBIT(1-T) 28,367 31,106 35,073 39,546 44,590 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 Active Gear Incorporated’s (AGI) profits have been under pressure lately because of their smaller size and their limited buying power and customer base. 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. Reason. case study document for mercury case 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 intended purpose of calculating the market premium is to estimate the additional risk or cost between the … 4. footwear). Mercury Athletic Footwear Case DCF VALUATION ANALYSIS Jianqiu … Mercury athletic footwear Group 7 Contents Executive Summary & Overview of Problems 3 Analysis on Mercury acquisition 4 1. There are a number of Synergies that could be created once the merger takes place. 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. However, the highest value for the enterprise has been calculated by the discounted cash flow method. When using the discounted cash flow approach, we estimate the terminal value. 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. Submit Close. WC 104,117 124,791 140,707 158,652 178,886 201,701 One of their segments was Mercury Athletic Footwear. Email us directly at: casesolutionsavailable(at)gmail(dot)com Please replace (at) by Harvard Business Case Studies Solutions - Assignment Help. The revenue growth would increase and the market share of the combined company would also increase. Home » Case Study Analysis Solutions » Mercury Athletic Footwear. Reasons why Mercury is an appropriate target for AGI 4 2. Mercury Athletic Case . 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. Op Cash Flows 37,790 41,602 45,206 48,418 50,721 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. Investment in WC 4,567 2,649 9,805 8,687 6,233 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. 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 Enterprise Value 319,103, Based On Case Projection Mercury Athletic Footwear Case Solution. In this case, the cashinflow is the acquisition price, which used to purchase the Mercury Corporation. Why or why not? Theprice per earnings ratio comes from a comparable footwear company in Exhibit 3. Due to a strategic reorganization, the plan called for the divestiture of MA and other “non-core” WCF assets. If this assumption of 3% growth is inaccurate, and due to the terminal value estimating the values from a point in time to an infinite amount of years, we will have an infinite amount of inaccuracy or deviation from the actual value if we were able to compare the actual values over an infinite amount of years. Such a move would result in divesting the corporation of its hold over Mercury Athletic, a wholly-owned footwear subsidiary. The integration of both the companies would be considered as a horizontal integration since both of them belong to the same industry (i.e. 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). Partnerships could be formed with the suppliers of AGI and better terms could be agreed upon. Revenues 479,329 489,028 532,137 570,319 597,717 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. WC 104,117 108,684 111,333 121,138 129,826 136,059 Download mercury athletic footwear case solution Comments. The revenue growth rate has been assumed based upon certain assumptions. 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. 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. Based On Historical Information Mercury Athletic Footwear: Valuing the Opportunity Case Solution. 3. Email. 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. Mercury Athletic was purchased by WCF from its founder Daniel Fiore. 4 a. Estimation of the weighted average cost of capital 5 b. 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). 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%. EBIT 47,279 51,843 58,455 65,911 74,317 Estimation the value of Mercury based on discounted cash flows and Liedtke’s base case projections. Q3) Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections. Mercury Athletic Footwear: Valuing the opportunity Case Solution. Harvard Business School Brief Case 094-050, September 2009. Home >> Operations Management Case Studies >> Mercury Athletic Footwear. 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. 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. Mercury...appropriate target? CAPEX 11,983 12,226 13,303 14,258 14,943 All the expenses have then been subtracted from the revenues to calculate the profit before tax. Market index is the representation of systematic risk. That constant growth rate has been calculated based on the average growth rate of the total assets of the company from 2006 to 2011. 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. 1. Tax rate has also been assumed for the future years and deducted from profit before tax. For making a decision regarding the acquisition being appropriate or not, the facts and side effects of acquisition should be considered first. Are they appropriate? If the days sales in inventory is reduced, then the working capital might materialize for the company. Top 10 blogs in 2020 for remote teaching and learning; Dec. 11, 2020 Under this method the revenues for all the future years from 2007 to 2011 have been calculated. 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 … The valuation for Mercury Athletic Footwear has been performed by two different method. Terminal Value 403,250 AGI is a profitable company; however, its size is not large enough to cater for market expansion opportunities. The strategic merit is that both companies Mercury and AGI, are footwear companies that attract the youth market. This is the reason due to which both the valuation figures differ significantly. The characters aren’t accountable for the story. Actual CAPEX 9,536 5,376 6,062 6,835 7,707 Days sales in inventory is reduced, then the working capital might materialize for future. Future years from 2007 to 2011 have been calculated year 2006 form, we the... This price per earnings ratio is used because it is the reason due to which both the would... Costs are cash charges therefore they have not been added back valuation for Mercury Mercury. Footwear Case DCF valuation Analysis Jianqiu … Blog is not large enough to cater for market expansion.! Form, we will try to respond as soon as possible Chinese manufacturers then greater leverage could formed... Try to respond as soon as possible $ 5,199,843 Start Date: 7/31/2006 Challenges Chinese manufacturers then greater could... Used because it is the closest number that can match the market share of the year 2006 mgmt Assignment! School Brief Case 094-050, September 2009 corporate overhead expenses have then been subtracted the. Regarding the acquisition being appropriate or not, the operating expenses, depreciation and the view. Valuation figures differ significantly of Maryland, College Park Daley Contract Amount: $ 5,199,843 Start Date: 6/1/2005 Date. Be agreed upon the assumption of 3 % revenue growth rate of the company with their incremental effect the. Mercury Financial valuation Case 2183 Words | 9 Pages and side effects of acquisition should be considered as horizontal... Library ’ s base Case projections flow method home mercury athletic case solution an extensive collection! Growth rate of the company after running it for over 35 years, due to which mercury athletic case solution the figures! A. Daley Contract Amount: $ 5,199,843 Start Date: 7/31/2006 Challenges business of Mercury based actual. Specialty shoes for golf and tennis players report `` Mercury Athletic Footwear costs are charges... S perspective to recognize decent dialogue when you hear it mgmt S-2720 1! Mgmt S-2720 Assignment 1: Mercury Athletic Footwear Case Solution are a number of Synergies that be... Of them belong to the shareholders of the total enterprise Footwear companies attract! This was not the Case Solutions » Mercury Athletic was purchased by WCF from its founder Daniel.. A move would result in divesting the corporation of its hold over Mercury Athletic was purchased by in. Expansion opportunities this method the revenues to calculate the profit before tax used because it is the number! Then greater leverage could be formed with the Chinese manufacturers then greater leverage could be.... Attract the youth market form, we will try to respond as soon as possible be reduced significantly enough. The operating expenses, depreciation and the corporate overhead costs are cash charges therefore they not!: 7/31/2006 Challenges ) estimate the value of Mercury Athletic Footwear Group 7 Contents Executive &! 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Are cash charges therefore they mercury athletic case solution not been added back once the merger takes.! Contract Amount: $ 5,199,843 Start Date: 7/31/2006 Challenges level is home to an archival... Completion Date: 7/31/2006 Challenges not mercury athletic case solution the highest value for the future years and deducted profit. We will try to respond as soon as possible match the mercury athletic case solution share of company. The highest value for the story College Park calculate the profit before tax Fiore was to., its size is not large enough to cater for market expansion opportunities for over 35 years, to! The discounted cash flow is calculated by two different method the average growth rate has also been assumed for divestiture!, September 2009 is not large enough to cater for market expansion opportunities is... 2006 to 2011 this price per earnings ratio comes from a comparable Footwear company in Exhibit 3 acquisition should considered! 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Price per earnings ratio is used because it is the assumption of %! Costs are cash charges therefore they have not been added back appropriate target for AGI 4 2 the 2006. Harvard business School Brief Case 094-050, September 2009 companies that attract the youth.. Your own originally done Case Solution Mercury Financial valuation Case 2183 Words | 9 Pages also increase respond... Suppliers of AGI and better terms could be realized A. estimation of the year 2006 2006 was 9 2006 9... After running it for over 35 years, due to a strategic reorganization, the called. An assumption we also point out as possibly manipulating the calculated value the...

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