Using the Discounted Cash Flow method and the formula approach (9.3a, p. 248) of the textbook, calculate the maximum price that should be paid for a target company - Oxford Corporation. Note that this company has 5 years of supernormal growth and then no growth.
Given information re Oxford Corporation (all $ Amounts in Millions):
Ro: Initial Year Revenues: $1,000
n = Number of growth years: 5
m = Net Operating Income Margin 15.0%
T = Tax Rate 40.0%
g = Growth Rate 18.0%
I = Investment Rate 8.0%
k = Cost of Capital 9.84%
h = Calculation Relationship = [(1 + g)/(1 + k)] - 1 0.0743
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