Discounting the terminal value, Financial Accounting

The Major Assignment Business Case Study is about American Cable Communications' proposed acquisition of the firm Air Thread Connections. The case study is available from the folder labelled ‘Major Assignment' in iLearn.
1. American Cable Communications' Senior Vice President for business development has engaged you to appraise the proposed acquisition. Accordingly, for the purpose of the Major Assignment you temporarily assume the role of Ms. Zhang (see case study page 5).
2. Consider the whole of the case study including background, supporting information and spread sheet.
3. Your task is to prepare a written appraisal report using a report format recommending whether the proposed acquisition should proceed. Include a clear justification.
4. Carefully read the enclosed Major Assignment Marking Rubric. In preparing your appraisal report make sure to consider each of the four marking criteria and your target proficiency.
Week 9 Friday 12th October 2012 2(3)
5. Your answers to the five questions listed under heading ‘Appraisal Questions' are intended to guide the appraisal, and should be clearly referred to in the appraisal report. Outline your answers to the five questions in a ‘pdf' file format attachment to the appraisal report.
6. Use the supplementary publisher spread sheet in your appraisal. The spread sheet is available from the folder labelled ‘Major Assignment' in iLearn. Include a print out of your spread sheet content in a ‘pdf' file format attachment to the appraisal report.
7 Avoid making simplified assumptions additional to those made in the case study. However, if you make assumptions in the appraisal report these should be clearly stated and have limited implications for your appraisal. Assumptions made should not contradict the pedagogical objectives of the major assignment.
8 Make sure that the appraisal is clearly informed by suitable corporate finance theory.

Appraisal Questions

1. Describe the methodology that you use to value Air Thread Connections [Hint: it may be possible to use more than one technique simultaneously].
2. Outline how you:
a. value cash flows for 2008 through 2012?
b. estimate the terminal value or going concern?
c. account for the non-operating investments in equity affiliates?
3. Explain the choice of the rate that you use in:
a. discounting un-levered FCF for 2008 through 2012
b. discounting the terminal value?
c. estimating the long-term growth?
4. Calculate the present value of Air Tread Connections on a going concern basis [Hint: use your long-term growth estimate in 3.c. above, and the supplementary publisher spread sheet.].
5. Calculate the total value of Air Thread Connections:
a. before considering any synergies
b. including synergies, assuming your estimates are correct [Hint: use the supplementary publisher spread sheet.].
9. Please direct ALL enquiries to the attention of the Unit-convenor. Mark your e-mail ‘Major
Assignment Enquiry - TT', and send it to Allow for 24 to 36 hours for a reply during week days.
10 Please periodically monitor iLearn ‘Announcements' for information which may be broadcast about the major assignment.

Posted Date: 3/28/2013 12:50:31 AM | Location : United States

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