Mr. Z, CEO of Shoes Inc., has identified Laces Ltd. as a possible acquisition candidate and a good strategic fit for the organization. Laces Ltd. has $100 million in assets and $20 million in par-value debt on the books. It currently trades for $35 per share on the open market and has 3 million common shares outstanding.
The current fiscal year closed yesterday with Laces Ltd. earning $10.50 M before interest and taxes (EBIT). After allowing for changes in NWC, taxes, depreciation, and capital expenditures, Laces Ltd. had $7.59 M in debt-free cash flows (cash flow from assets). Analysts expect their CFA to grow at 20% for the next two fiscal years and then settle down to a 5% annual growth rate thereafter. Laces Ltd.'s investors demand a return of 15% for similar risk assets.
Using the WACC-DCF approach, how much should Shoes Inc. should be willing to pay per share to acquire Laces Ltd?