1.It is recommended to do Exercise 8.12 prior to the present one. Here we look at the same population growth model N (t) = rN(t), N(0) = N0. The time….
Discuss the strategic rationale for American Cable Communications’ (ACC) acquisition of AirThread Connections (ATC).
AirThread Connections Case Instructions and Questions You can buy the case at: https://hbr.org/product/valuation-of-airthread-connections/4263-PDF- ENG (choose the “English PDF” option). You should prepare a written case report, with a page limit of five pages. Your report should be accompanied by an appendix containing exhibits showing your analysis (the appendix does not count towards the page limit). To prepare the exhibits, you will need to use Excel (or similar spreadsheet software). Please provide titles and descriptions for all exhibits. As for the previous two cases, you should structure your case report as an executive-style memorandum, which contains the following components (in that order):
- Executive summary (one page at most)
- A brief introduction that describes the two companies (less than a page)
- Your analysis, which addresses questions 1 and 2 given below (the bulk of your write- up)
- Conclusion (very brief, basically just giving your estimate of AirThread Connections’ value)
- Discuss the strategic rationale for American Cable Communications’ (ACC) acquisition of AirThread Connections (ATC).
- Estimate the enterprise value of Please ignore any synergies or illiquidity discounts in your analysis.
- Compute ATC’s unlevered cost of
- Forecast ATC’s unlevered free cash flow (i.e., assuming ATC has no debt) for the period from 2008 to 2012.
- Estimate the present value of these cash
- Estimate the present value of interest tax shields for the 2008-2012 To simplify your analysis, assume ATC will maintain a constant level of debt in this period, and this debt will equal 4 times ATC’s EBITDA in 2007.
- Compute ATC’s Assume here that ATC maintains a constant debt-to- equity ratio, and that this debt-to-equity ratio will be determined based on leverage levels in ATC’s industry.
- Estimate ATC’s terminal value (based on free cash flows starting in 2013). Assume ATC will maintain a constant debt-to-equity ratio starting in 2013 (i.e., rather than staying constant, its debt will increase at the same rate as its equity), and that this debt-to-equity ratio will be determined based on leverage levels in ATC’s (Hint: you will need to estimate ATC’s long-term growth rate to answer this question.)
- ATC also has non-operating assets (i.e., non-controlling equity investments). Estimate the value of those assets using the trading multiple
- Use information from from steps a) through g) to compute your estimate of ATC’s enterprise value.