Reference no: EM13205065
Suppose you are an analyst asked to prepare a valuation of Yeats Valves and Controls (YVC) for Kate Porter. She has asked you to estimate the appropriate cost of capital (as needed) and per-share value of YVC three ways:
1. Valuation A: Use a discounted cash flow (DCF) analysis and the forecasts in Exhibit 3 to value YVC „as is?. Assume cash flows after 2004 grow at 3% annually.
2. Valuation B: Now assume TSE acquires YVC with the following assumptions:
i. TSE maintains its current capital structure indefinitely. Assume TSE?s debt is currently rated Aa (ignore the Baa rating shown on page 4 of the case).
ii. Synergies will cause EBIT to be 10% higher each year than the Exhibit 3 forecasts.
iii. Cash flows will grow 5% annually forever after 2004.
3. Valuation C: Using a multiples analysis (Porter feels P/E and MV/BV [Price/Book] are the only reliable multiples).
In addition to the information provided in the case, please assume the following:
- You are being asked to conduct this analysis on May 2, 2000, and you should use the most current data available for your analysis. To simplify your analysis, include the full-year 2000 forecast and discount cash flows back to 12/31/99.
- "Other income, net" is not part of operating profit.
- "Working capital needs" in Exhibit 3 are the NWC balances. Assume NWC includes Accounts Receivable, Inventories, and all Current Liabilities.
Prepare a memo to Kate Porter describing your analysis and how she should interpret it, specifically addressing the following:
4. What is the minimum price YVC should accept from TSE?
5. If you were advising TSE, what is the maximum price they should offer for YVC?
6. How would you explain the differences between your valuation results (A, B, and C)?
Attachment:- Assignment.rar
What is the discounted payback period for these cash flows
: What is the discounted payback period for these cash flows if the initial cost is $5,900? (Do not round intermediate calculations and round your final answer to 2 decimal places.
|
What fallacy of payback analysis does this ror value
: Julian Browne, owner of Clear Interior Environments, purchased an air scrubber, HEPA vacuum, and other equipment for mold removal for $15,000 eight months ago. Net cashflows were $-2000 for each of the first two months, followed by $1000 per month..
|
State tungsten metal is used to make incandescent bulb
: Tungsten (W) metal, which is used to make incandescent bulb filaments is produced by the reaction
|
What is the fastest growing component of gdp and why
: Go to the Bureau of Economic Analysis on the Department of Commerce's Web site, and look up the latest new release for real GDP. Where are we in the business cycle What is the real GDP today What is the nominal GDP todayWhat is the difference between..
|
Prepare a valuation of yeats valves and controls
: What is the minimum price YVC should accept from TSE and how would you explain the differences between your valuation results (A, B, and C)?
|
Define solution of tribasic sodium phosphate
: A scientist wants to make a solution of tribasic sodium phosphate, Na3Po4, for a laboratory experiment. How many grams of Na3PO4 will be needed to produce 425 mL of a solution
|
Explain what is the effect on the equilibrium wage
: Suppose that the demand curve for accountants isED=20-W. The supply curve isES=2+2W. a. Graph the demand and supply curves. What is the equilibrium wage and number of accountants hired b. Suppose California taxes accountants $2.
|
Explain methylpentane is treated with sodium methoxide
: Provide the name of the major alkene product that results when (2S,3S)-2-bromo-3-methylpentane is treated with sodium methoxide in
|
What will happen to the price and quantity of beach house
: The summer beach house rental season is June through early September; what will happen to the price and quantity of beach house rentals in New Jersey during the summer season compared to the off-season Is there a movement or a shift, why
|