Reference no: EM133019003
Question - A CabAir, a young airline company is expected to mature by year 5. By this time, it is expected to generate P4,000,000,000 in revenues. CabAir is unlevered (i.e. there is no debt). Currently, the cash balance is immaterial. There are 100,000,000 shares outstanding.
Other relevant data includes:
Airline Industry EV/Revenues (mature companies) 4x
Average EV/Revenues for all publicly listed companies 3x
A certain "3-year-old" airline's EV/Revenues 10x
Appropriate discount rate for this 10%
Because this CabAir is new, risks of liquidity and survivability will make it appropriate for us to slash the value we would arrive by half (50%). Determine the estimated stock value after such adjustments.
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