The estimated values of Warner stock were indeed correct. The merger was announced in early 1989 (March) and the profits of 1988 were used as the basis to determine the free cash flows and EBIT, therefore the slightly higher amounts that have been assumed are quite reasonable and jsutified. Moreover, four different discount levels have been considered, which would provide a good indication of the level of fluctuations that could be expected through the daily changes in stock prices due to the vagaries of the market and hence represents the range within which the share price may be expected to vary. The Company values that have been derived also take into account terminal EBIT multiples. Thus the computed value of the Company that has been obtained is a realistic estimate, taking into account both market value as well as actual values, also factoring into the equation values of acquisitions, short and long term debts, depreciation percentages and even including corporate overheads that may be anticipated in the case of a merger where extra compensations may have to be made. The value of the Company equity that has been derived from the two way table of discounted cash flow valuation is therefore a realistic valuation of the Company value, which ahs then been subdivided into individual stock values taking into account the number of stock holders that currently exist. Thus the value of Warner stock that has been derived is an accurate estimate, taking into account all financial factors and
also assessing the range of fluctuation that is possible.