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Phillip Morris

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A Based on the forecast provided in Exhibit 12 and the methodology discussed in this course, can you justify the $110/share valuation? The $12/share valuation of the “stub”? For the purpose of this part, assume that the assumptions underlying exhibit 12 are correct. Present a DCF valuation of the restructured firm based on the assumptions underlying Exhibit 12 forecasts. Hint: are the forecasted cash flows of exhibit 12 the type of cash flows that you need for valuation purposes?
The proposed valuation after restructuring gives the value of $12 after restructuring. But this avoids the future tax shields
The valuation of the Kraft, Inc. shares comes around $110 to $124, while the Phillip Morris paying very less in order of $79 to $92 | Phillip Morris's value | Proposed Restructuring | Phillip Morris's value (with ITS) | Proposed Restructuring (with ITS) | | | | | | No of Shares Outstanding | 122.22 | 122.22 | 122.22 | 122.22 | Value of the Firm | 11000 | 13444 | 9646 | 15158 | Share Price | 90 | 110 | 78.92 | 124.02 |

Thus the new price for the shares will become around $124. And this proves that the company should go with the restructuring rather than going with the offer made by Phillip Morris
Thus we recommend that the Kraft’s should go with the proposed restructuring in search for a better value for the shareholders

B. Are these forecasts reasonable? Provide an evaluation/critique of the main assumptions.
As the management feels that the Phillip Morris has underpriced them, and their value is much more than the proposal at $90. And they can easily increase their value by restructuring.
They can prove to Phillip Morris that what they are paying is actually less, by showing them their restructuring benefits and can claim to increase the bidding value. krafts can also pitch that Phillip Morris is actually paying very less because of

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