This case will be evaluated from two perspectives: Firstly, the economic decision and secondly the governance decision. The Hershey Trust Company faces the decision whether it is appropriate from an economic standpoint to consider the two bids by competitors and if it meets the original mandate from Milton Hershey.
First, the situation will be evaluated from the economic and strategic perspective of the two bids of Nestle and Wrigley.
The economic evaluation is based on a Cash Flow Projection (NPV) and the Enterprise Value of Hershey. Based on the NPV of the Cash Flow calculation Hershey is valued at $9,260 (Attachment 3) which equals $62.41/share, and based on EV the value amounts to $10,720 ($80.40/share). Both calculations have been based on case information and assumptions were held minimal. The variance in value from these two methods can be explained by the overvaluation of the industry. Hershey is overvalued (based on a stock price of $73.81) using the discounted Cash Flow......
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