Suppose you are an analyst asked to prepare a valuation of

Reference no: EM13381338

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

Reference no: EM13381338

Questions Cloud

You are a partner of private equity firm tiger llc : you are a partner of private equity firm tiger llc acquiring firm and you have the following information for the

Portfolio analysisyou have been given the expected return : portfolio analysisyou have been given the expected return data in the following table for three assets -fg and h- for

1 when analyzing a companys performance what are some of : 1. when analyzing a companys performance what are some of the problems of relying on ratio analysis only?2. how does

An investment project has annual cash inflows of 3200 4100 : an investment project has annual cash inflows of 3200 4100 5300 and 4500 and a discount rate of 14 percent.what is the

Suppose you are an analyst asked to prepare a valuation of : suppose you are an analyst asked to prepare a valuation of yeats valves and controls yvc for kate porter. she has asked

Calculating net float each business day on average a : calculating net float each business day on average. a company writes checks totaling 30000 to pay its suppliers.the

Initial price 1000year 1ending value of portfolio : initial price 10..00year 1ending value of portfolio 10.50distribution 0.30market return 12year 2ending value of

One area in which you are assisting is in the setup of : one area in which you are assisting is in the setup of business development in central and south america for navigation

Navigation systems inc now has total worldwide revenues of : navigation systems inc. now has total worldwide revenues of over 500 million forecast for this coming year. you have

User Account

All Pages