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Accounting and finance are two different things as far as nature and concepts are concerned but, most of the time people interrelates their concepts altogether. In real sense, both of these things have a real difference between them (Cinnamon & Larsen, 2006). Accounting is used to record the financial transactions of the company while finance is used to use the funds at a place from where the likelihood of earning would be on a higher side.
In a broad nutshell, both of these terms are extremely important and companies like to initiate these things in total for the sake of organizational productivity (Cinnamon & Larsen, 2006). There are number of concepts that come under the ambit of finance and among all of them, Merger and Acquisition (M&A) is one of them. According to the financial position and size of Hush Energy, two approaches can be used which predominantly would be DCF and WACC.
In order to initiate the merger, both cash + share approach would be used accordingly along with the computation of Terminal Value.
Terminal Value is the actual value of an organization which is always different from the value found in the financial markets.
D = Dividend
Re = Cost of Equity
G = Growth rate
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Buy Husk Energy essay paper online
= 0.13 (1+8%) / 16%-8%
1.0504/0.08
P = 13.13
Per share value of the company is 13.13$, hence the company should not give more than this amount to the Hush energy.
Total Shares which the company issues are 1404 million, hence the total terminal value of the going concern will be
1404 * 13.13 = 18,434.52 Million $
Or 1.843 Billion $
The decision of the management is quite right and it can be buy because the actual worth of the company is on the higher side as compared to the computed worth.
