Preview

Paginas Amarelas Case Study Essay

Satisfactory Essays
Open Document
Open Document
363 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Paginas Amarelas Case Study Essay
Below is a free essay on "Paginas Amarelas Case Study" from Anti Essays, your source for free research papers, essays, and term paper examples.

CASE STUDY 4: PAGINAS AMARALES VALUATION

08

Fall

AFF5300 Case Studies in Finance- March 2013
Executive summary
Juan Lopez, a new associated of JP Morgan’s Latin America M&A Group was given a responsibility to value the telephony directory businesses in Argentina, Brazil, and Chile of Paginas Amarelas. The aim of this report is to use the fundamental approach to help Lopez to estimate the value of these three units within Paginas Amarales. This analysis adopted the discount cash flow (DCF) approach. The analysis firstly determined the long term perpetuity growth rate to determine the terminal value in the DCF valuation. To derive the DCF, it is critical for this analysis to obtain the discount rate. Thus, it estimated the Weight Average Cost of Capital (WACC) as the discount rate. To estimate the WACC, the following inputs are estimated to generate the WACC of each country: cost of debt and the dost of equity, and the debt to value ratio and equity to value ratio. After the analysis obtained the discount rate of each country, the DCF values of the three countries were estimated. This analysis generates the value of $208, 260,206 in USD of the three units within Paginas Amarales. There are some flaws in using the models and approaches to generate the inputs which had been discussed. However, due to the insufficient and the limitations of data and information, it is difficult to provide the precise valuation. Nevertheless, this analysis generated a close approximation which is still a good guide to observe the valuation of Pagina Amarelas.

By: Tam Huynh (24675512)

Table of Contents
1. Introduction 2
2. Valuation Analysis’s Assumptions 2
3. Determination of Long Term Perpetual Growth Rate 3
4. Cost of Debt Estimation 3
5. Cost of Equity Estimation 3
5.1. Determining Risk-Free Rate 4
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Good Essays

    Southern Homecare Cost Of Capital Case

    • 1073 Words
    • 4 Pages

    Southern Homecare Cost Of Capital Case

    In this case, the corporate cost of capital needs to be analyzed and hence, to estimate that, a company’s long-term source of funds (common stock, long-term debts and preferred stock) should be used. Since the corporate cost of capital is used to make decisions today, which will affect the future cash flows, the only acceptable costs are today’s marginal costs that are used. These marginal values are the estimates of the cost of capital that will be raised in future which will provide an accurate estimation of raising the capital in future.…

    • 1073 Words
    • 4 Pages
    Good Essays
    Read More
  • Powerful Essays

    Atlas Metal Company
    • 1487 Words
    • 6 Pages

    Atlas Metal Company

    The purpose of this report is to help a financial special assistant, Linda, to analyze the financial position of Atlas Metals Company and deciding its capital budgeting and capital structure. Firstly, I explain why firm should use Net Present Value (NPV) methods for capital budgeting rather than Return on Investment (ROI) method and Payback Period method. Secondly, I calculate the Weighted Average Cost of Capital (WACC) which will be used as discount rate while calculating NPV. Then, I decide which rapid prototyping system company should invest as well as I compare the each expansion projects’ IRR with WACC to decide which projects should be invested and which should not. After deciding projects which should be accepted, I draw Investment Opportunity Schedule (IOS) and Marginal Cost of Capital (MCC) graphs to decide where the company should finance accepted projects.…

    • 1487 Words
    • 6 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Revere Street - Project Valuation
    • 742 Words
    • 4 Pages

    Revere Street - Project Valuation

    In the world of real estate, location sometimes determines the future of a property, residential or non-residential. Revere Street, a residential property located in the heart of downtown Boston, Massachusetts, provides a wonderful location for residents who also like to enjoy the convenience and diversity the city could offer. Revere Street shares Boston's unique New England historical city view and modernized financial district landscape. The pin point with the letter A on the map below shows a geographic center of Revere Street inside the City of Boston.…

    • 742 Words
    • 4 Pages
    Powerful Essays
    Read More
  • Good Essays

    The Financial Analysis Of Chipotle Mexican Grill Inc.
    • 757 Words
    • 4 Pages

    The Financial Analysis Of Chipotle Mexican Grill Inc.

    It is suggested that while the valuation multiple approach might be an easy and efficient valuation method to value mature and well-established firms, it might not be an appropriate valuation method to value the companies in extraordinary circumstances, since it does not seem feasible to find highly comparable companies for the latter. Thus, considering that Chipotle had just gone through the foodborne illness outbreak and so found itself in a crisis situation as 2016, the valuation multiple approach does not seem to be the most suitable valuation method to value Chipotle. However, the EV/Sales multiple values Chipotle at $481.70 per share, which is closest to the share price of $443.90 given by the DCF…

    • 757 Words
    • 4 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Testing
    • 471 Words
    • 2 Pages

    Testing

    23-Jan 1 Introduction 2 Review of financial statements 30-Jan 3 Analysis of financial statements 6-Feb 4 Introduction to the Time Value of Money 13-Feb Test via Moodle Chapters 2-4 20-Feb Midterm 1 27-Feb 5 Discounted Cash Flow Valuation 6 Bonds and Bond Valuation 6-Mar 13-Mar 7 Stocks and Stock Valuation Test via…

    • 471 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    Teletech Corp Case Analysis
    • 1210 Words
    • 5 Pages

    Teletech Corp Case Analysis

    The given case analysis presents an argument between the use of a single hurdle rate to evaluate all segments of the company versus the use of multiple hurdle rates corresponding to the risk of the particular segments in the year 2005. The hurdle rate is the minimum rate of return on a project or investment required by an investor. The riskier is the project, the higher the hurdle rate. Teletech has two main business segments; Telecommunications services whose function is to provide long distance, local and cellular telephone services and the Products and Systems Segment that deals with the manufacturing of computing and telecommunication equipment. The firm’s book value was $16 Billion , comprising of $11.4Billion in Telecommunication Services and $4.6Billion allocated to Products and Systems. Telecommunication accounts for 75% of the market value and Products and Systems account for 25%. The Return on Capital is 9.10% for Telecommunication services and 11% for Products and Systems. Teletech uses a hurdle rate (or WACC) of 9.30% to all capital projects.…

    • 1210 Words
    • 5 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    Hanson Industry Hpl
    • 431 Words
    • 2 Pages

    Hanson Industry Hpl

    Questions Covered 1.There are two main parts to any valuation analysis: Projection of cash-flows and discounting them by the appropriate discount rate. Your main objective is to analyze the appropriateness of both these…

    • 431 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    Appraisal Report of Air Thread Connections
    • 1011 Words
    • 5 Pages

    Appraisal Report of Air Thread Connections

    ABSTRACT This paper intends to analyze and evaluate the Air Thread Connection (ATC) Company and determine whether the acquisition by the American Cable is acceptable. From the outset, it is observable that, the acquisition would give American Cable access to wireless technology and the wireless spectrum. Thus acquisition offers more competitive service bundles on company’s service delivery. However, the real situation and the anticipated benefits will only be ascertained by insight analysis. MAIN METHODOLOGY ON VALUING ATC APV METHOD: It is imperative to note that, discounted cash flow methodology is applied in valuing Air Thread Connection Company. This is critical in establishing the viability of the anticipated acquisition. This methodology requires use of the projections from Air Thread Connections, which are given in the Exhibit 1. This allows calculation of the total revenue, EBITDA, EBIT and the Unlevered Net Income. Furthermore, the depreciation and Amortization, Capital Expenditures and the assumptions projected in Exhibit one case to make the adjustments in working Capital. These will all facilitate calculation of the Unleveraged Cash Flow (UFCF) from 2012 which stable increases. Consider the computations referencing income statement on separate sheet. TERMINAL VALUE Furthermore terminal value as a key valuation factor which can be calculated in two ways namely perpetuity model and market value of comparable companies. The perpetuity model involves use of terminal year free cash flow (FCF), growth of terminal year cash flow over the previous year and WACC with additional debt (COMFORT & BRIEGER, 2002). On the other hand, similar company model requires the EBIT and market value to determine the EBIT ratio of similar companies in…

    • 1011 Words
    • 5 Pages
    Powerful Essays
    Read More
  • Better Essays

    Congoleum Corp.
    • 1985 Words
    • 8 Pages

    Congoleum Corp.

    In valuing the target company Congoleum after an LBO by First Boston found the expected free cash flows generated by this firm from 1980 to 1984. These numbers were based on values provided in the case. From there, we employed the Adjusted Present Value method to discount these cash flows because we assumed that Congoleum was varying its Debt to Equity ratio during those years. We discounted these cash flows by the required return on assets that was in turn calculated through use of the Modigliani-Miller unlevering formula (to derive the Asset Beta) and the Capital Asset Pricing Model. The required return on Congoleum debt was calculated by the expected return of the average CCC-company’s debt and the expected return of debt under default. Then, the present value of financial side effects was taken into account by discounting the interest tax shield by the required return on debt. Finally, we calculated the terminal value of cash flows by assuming a constant 4.14% growth rate in perpetuity and a constant D/E ratio for the years after 1984. Thus, these cash flows were initially discounted under WACC-ME. From there, we factored in prior debt and cash that Congoleum had generated to calculate the total equity value of the firm after the LBO had taken place.…

    • 1985 Words
    • 8 Pages
    Better Essays
    Read More
  • Satisfactory Essays

    Solutions to Valuation Questions
    • 1713 Words
    • 7 Pages

    Solutions to Valuation Questions

    Solutions to Valuation Questions 1. Assume you expect a company’s net income to remain stable at $1,100 for all future years, and you expect all earnings to be distributed to stockholders at the end of each year, so that common equity also remains stable for all future years (assumes clean surplus). Also, assume the company’s β = 1.5, the market risk premium is 4% and the 20-30 year yield on risk free treasury bonds is 5%. Finally, assume the company has 1,000 shares of common stock outstanding. a. Use the CAPM to estimate the company’s equity cost of capital. • re = RF + β * (RM – RF) = 0.05 + 1.5 * 0.04 = 11% b. Compute the expected net distributions to stockholders for each future year. • D = NI – ΔCE = $1,100 – 0 = $1,100 c. Use the dividend discount (i.e., free cash flow to equity investors) valuation model to estimate the company’s current stock price. • Pe = D / re = $1,100 / 0.11 = $10,000 • price per share = $10,000 / 1,000 = $10 2. Same facts as in (1) above, but assume you expect the company’s income to be $1,100 in the coming year and to grow at the rate of 5% in every subsequent year into infinity. Also, assume that the company’s common equity as of the end of the most recent fiscal year is $8,000, and the investment needed to support the growth in net income causes common equity to increase by 5% each year. Assume the company is an all-equity firm; i.e., all financing comes from stockholders and none comes for debtholders. In this case, the company’s balance sheet has net operating assets (NOA) of $8,000, common equity (CE) of $8,000, and zero net financial obligations (NFO). a. Compute D1 for the coming year and the rate of growth in Dt for every year thereafter. • D1 = NI1 – ΔCE1 = 1,100 – 0.05 * 8,000 = 700 • D2 = NI2 – ΔCE2 = (1,100 * 1.05) – 0.05 * (1.05 * 8,000) = 1.05 * (1,100 – 0.05 * 8,000) = 735 = 700 * (1 + 0.05) • D3 = NI3 – ΔCE3 = (1,100 * 1.052) – 0.05 * (1.052 * 8,000) = 771.75 = 735 * (1 + 1.05) • so D is 700 in year 1 and grows at 5%…

    • 1713 Words
    • 7 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    Valuation and Capital Budgeting
    • 23217 Words
    • 93 Pages

    Valuation and Capital Budgeting

    The signing of big-name athletes is often accompanied by great fanfare, but the numbers are often misleading. For example, in late 2010, catcher Victor Martinez reached a deal with the Detroit Tigers, signing a contract with a reported value of $50 million. Not bad, especially for someone who makes a living using the “tools of ignorance” (jock jargon for a catcher’s equipment). Another example is the contract signed by Jayson Werth of the Washington Nationals, which had a stated value of $126 million. It looks like Victor and Jayson did pretty well, but then there was Carl Crawford, who signed to play in front of Boston’s Red Sox nation. Carl’s contract has a stated value of $142 million, but this amount was actually payable over several years. The contract consisted of a $6 million signing bonus, along with $14 million in the first year plus $122 million in future salary to be paid in the years 2011 through 2017. Victor’s and Jayson’s payments were similarly spread over time. Because all three contracts called for payments that are made at future dates, we must consider the time value of money, which means none of these players received the quoted amounts. How much did they really get? This chapter gives you the “tools of knowledge” to answer this question.…

    • 23217 Words
    • 93 Pages
    Powerful Essays
    Read More
  • Good Essays

    Identify the Industries
    • 718 Words
    • 3 Pages

    Identify the Industries

    This paper aims to analyze the common-sized balance sheets and ratios of 12 companies in order to identify their respective industries (Please refer to the Appendix for an overview of the financial data).…

    • 718 Words
    • 3 Pages
    Good Essays
    Read More
  • Powerful Essays

    bankruptcy analysis for Sony
    • 4375 Words
    • 17 Pages

    bankruptcy analysis for Sony

    This document research the telephone manufacture and their financial statement to calculate the Z-score valuables and analysis the method to minimize the risk of bankruptcy.…

    • 4375 Words
    • 17 Pages
    Powerful Essays
    Read More
  • Good Essays

    Star Appliances B
    • 1175 Words
    • 5 Pages

    Star Appliances B

    In addition to the estimation of the cost of equity, Star Appliance Company is also considering increasing their current debt ratio of 9.5% to the industry average of 19%. With a higher current debt ratio the WACC will be lower, at a rate of 8.24%. The cost of equity of each product was valued using the beta from the industry averages. The beta of the home appliance industry is 0.95, while the beta of the agricultural machinery industry is 0.88. Through the use of the CAPM model, these betas yield a cost of equity for the home appliances of 11.29% and for the agricultural machinery of 10.7%. The WACC of each individual project is then compared to the project’s IRR. The WACC of the home appliance project was found to be 10.4% and the WACC of the agricultural machinery project was calculated as 9.92%, while the IRR’s of the appliance and agricultural machinery projects were 11.29% and 10.7%, respectively. Therefore, both projects should be accepted based on the notion that the internal rate of return of each project is greater than the weighted average cost of capital.…

    • 1175 Words
    • 5 Pages
    Good Essays
    Read More
  • Powerful Essays

    Valuation of Amcl Pran
    • 7901 Words
    • 32 Pages

    Valuation of Amcl Pran

    I declare that the submitted project paper /internship report is original and solely produced by me. This is not a copy from any sources. If this paper/report is found a copy work which falls under the plagiarism norms, this paper/report will be deemed cancelled and can be reported to the appropriate authority of the University.…

    • 7901 Words
    • 32 Pages
    Powerful Essays
    Read More

Related Topics