VALUATION (Medfield Pharmaceutical session)

VALUATION (Medfield Pharmaceutical session) Consider the current sale of Oak Street Health to CVS as discussed in the attached article in Appendix B. [a] How can you explain the purchase price by CVS of $10.6 billion (i.e., $39 per share--a 50% premium over the prior equity value of Oak Street) when they are still losing $200 million each year? [b] How can each site of Oak Street do so well when their customers are almost all covered by Medicare and Medicaid and come from largely disadvantaged populations? [c] How can you determine a total market value for a firm like this and what is the source of it? Would you buy more stock at the current price or sell what you have for $39 per share? Why?