The Phlanders Flange Co. has been doing quite well lately and would like to accelerate its growth within the flange industry. Harry Flatiron, the firm's CEO, has become interested in growth through acquisition because of some exciting articles in the business press. In particular he's interested in a friendly acquisition of the Framingham Flange Factory, whose general manager, Jack Daniels (a major stockholder in Framingham), he's known for some time. Harry is prone to quick action based on brief analyses that he does himself. In the past his instincts have been pretty good, and this style has not as yet caused any major mistakes. Harry has taken Framingham's own estimate of its future cash flows and long term growth rate along with synergies he and Jack have estimated to come up with a projected value for the company. All this has led to a proposal to offer Framingham's stockholders a 60% premium on the price of their stock. You're Phlanders' CFO, but Harry has done all this on his own. He's about ready to make a verbal offer to Framingham's management, and has asked you to check over his figures. His arithmetic is correct, but you're very concerned about the validity of his assumptions. Prepare a short memo to Harry outlining the risks associated with value estimates in mergers and the consequences of a mistake. Include advice on how to proceed.