What is the Value of the company?

What is the Value of the company's equity?

What is the company worth on a per share basis?

If the company is offered $40 per share by its competitor, Destiny Airways, should the board of directors accept the offer? Why or why not?

Corporate Valuation (Problem 2) Topics: Free Cash Flow to Firm (FCFF, Two-st Model Weighted Average Cost of Capital (WACC) age Assume that today is December 31, 2014, and that the following information applies the Vermeil Airlines: Annual revenue for 2014 was $1,500 million and is expected to grow over the next 5 years at a rate of 20% per year (2015-2019) Operating Expenses (including depreciation and amortization) are expected to be 80% of revenue during 2015 and 2016, and 70% of revenue during 2017 through 2019 Depreciation and amortization for 2015 will be $150 million The company expects to have a 32% tax rate The change in gross property, plant & equipment (PP&E) is expected to be S200 million in 2015, and is assumed to grow 10% per year thereafter The company anticipates that the change in net operating working capital 2014 to 2015 will be $85 million, and that NOWC will at the same rate as revenues in future years The company anticipates that it will grow at a constant rate of3.0% into perpetuity at the end of the planning period (Terminal Value in 2019) Vermeil's beta is 1.75, the current treasury yield is 3.25% and the historical return on the market is 11.5% The company's target capital structure is 25% debt financing, 10% preferred stock financing, and equity financing The yield on preferred stock is 10.5% The before-tax cost of debt is 7.50% The company's total assets were S1,300 million at the end of 2014 The company has 200 million shares outstanding Questions: 1. What is the value of the total company? 2. What is the value of the company's equity? 3. What is the company worth on a per share basis? 4. If the company is offered S40 per share by its competitor, Destiny Airways, should the Board of Directors accept the offer? Why or why not? 5. EBITDA Multiple 5x-Terminal Value 6. Revenue Multiple 3.5x Terminal Value