Air Thread Connections Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Solution 1

Approaches and Cash flow Valuations

There are many methods to assess the Fellowship, but taking into account of its preliminary assessment as trading operations, the potential economic benefits are expected to reach along with the compliance of legal and regularity requirements of the state. The approach has already discussed in the summary above, which reinforces to earn high returns to maximize company’s value and shareholders wealth consequently. One of the method for the maximization of value is to finance an acquisition entirely by debt. Cash flows will be valid with the average cost of 7.83% and 7.83% on the thinking of the cost of debt, a 4.5% respectively.

airthread case solution

Analysis with Terminal Value and Going Concern Estimates

The evaluation uses the expected benefit in the future operation of the company to follow the presumption of continuity or not. This analysis is carried out to make sure the continuity of the nature of business by properly analyzing the terminal values and the estimates. The data is then provided to the management of income tax revenues to establish a better ground for calculations. On the other hand, an alternative method of evaluation is used to calculate the value of expected future cash flows at present time. This technique uses evaluation period and the net cash flows to predict the viability of a commercial project. In addition, since the cash flows are generated in the future, so it becomes vital to bring the future out flows in present times. Time value of money (TMV) says, ‘Money receives today worth more than money receivable tomorrow’. So, in order to evaluate the project in real terms, all future cash flows are to be brought in present terms to make a comparison. Discounting is the technique through which we can discount future cash flows to the present. The reason to choose the Terminal value model for the evaluation is only that it considers time value of money. For Airthread, all cash flows are to be discounted first to the present and then by making a comparison with the cash outflows of the project, project is assessed, evaluated and reported for decision.

Solution 2

Discounted Rate

Ms. Zhang has to consider an appropriate discount rate to assess the evaluation process as precisely as to arrive at a comprehensive conclusions. Weighted average cost of capital (WACC) is the average rate a company is expected to pay off its equity and debt holders. For a capital structure consisting of both debt and equity, WACC is the best measure of cost beyond which investment pays off. Therefore, it is a common myth of the market to use WACC for discounting and evaluation purposes where the project is financed by both debt and equity. For the evaluation of project it has been assumed that, WACC is taken to discount future cash flows and making an appraisal of commercial licensing.

Additional Analysis of all aspects of APV, PV and their values of terminal

The present value of free cash flows provides a more realistic picture of value chain. This is a reasonable estimate of cash flows over the period of time. The evaluation is demonstrated in an Excel file annexed to the document that shows the changing trend of revenue over the period of time. And it has been computed and analyzed that the effect of cash flows through appraisal techniques. For the computation of cash flows profit before interest and tax (EBIT) is taken. And it has been noticed that the profit after tax (PAT) has increased notably by the years. company's operating income now, has been replaced in the future, the profit and loss account profit before interest and tax is taken. However, the Net operating profit each year increases up till 2012 comparatively. The consumption of cash is expected to be back on the consumption of cash flows as a result. Because the low value in 2012 to thirty-would increase up to 5%, the increase in pressure on the capital account is reached. Moreover, the capital that will contribute to each of the items using percentages are projected capital for the next year, the current liabilities and current assets over the years are used to calculate the working capital requirements to fund accordingly. Now, the working capital requirement has cut downto 4% from 6%. Moreover, by using discounted cash flows,AirThreadis 100% financed through equity despite the presence of beta. Beta asset is calculated using property rights, which is shown in calculations in the attached excel files.

Solution 3

Terminal Value Growth Rate

The survival rate of growth of capital gains and investment model of investment growth is expected in the future by using the ratio of light to calculate the final value. So, 674.52 / $ 4,061.45 net operating income after taxes for / 2012. Capital includes long-term debt and the rights of minorities. Currently.................

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