Cook PLC is planning to make a take-over bid for Clarke PLC

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Cook PLC is planning to make a take-over bid for Clarke PLC

Paper instructions:
Cook PLC is planning to make a take-over bid for Clarke PLC. The Company has approached you as a management consultant and have asked that you calculate the current share price of Clarke PLC based on the following parameters using shareholder value analysis.
Key value drivers for Clarke PLC.
Sales 2013(yr 0) £400,000,000
Forecast period 5 years. Any longer is considered too uncertain
Sales growth rate per annum 4%. This is based on a revised pricing strategy
Operating profit margin 7%. Increasing by 2% per annum for the next 5 years
Incremental fixed investment 6% Decreasing by 1% per year
Incremental working capital 8% Decreasing by 1% per year
Corporation tax rate 30%. This is expected to remain constant for the next 5 years.