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Factors used to determine price paid for mergers & acquisition

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What are the factors used in determining the price paid for mergers and acquisitions?

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This solution is comprised of a detailed explanation to answer the factors used in determining the price paid for mergers and acquisitions of more than 200 words of text.

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There are several methods which are used to value target firms. The common methods are the discounted cash flow approach and the market multiple method. The discounted cash flow approach to valuing a business involves the application of capital budgeting procedures to an entire firm rather than to a single project whereby proforma statements that forecast the incremental free cash flows expected to result from the merger and discount rate are require. ...

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