1. Is Sun Microsystems a good strategic fit for Oracle?
2. What approaches would you use to to place a value on Sun Microsystems?
3. Assuming a discounted cashflow (DCF) valuation:
- What rate of return should Oracle require on the acquisition?
- What base-case cashflows do you forecast?
- What is your estimate of terminal value?
- What is the enterprise value of Sun Microsystems?
- What is Sun’s equity value?
- You should assume a 35% corporate tax rate and a 7% market risk premium for your valuation.
4. Identify the synergies and estimate the effect of synergies on enterprise value?
5. If a competing bidder appears, how high a price should Oracle be willing to offer?
