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Comparable Transaction Analysis:
The comparable transactions give more accurate result when more than one transaction is used. The method of valuation helps in identifying the current value and potential growth for the company. The results from the comparable transaction analysis are as follows:
EV/EBITDA EV/Revenue P/E Ratio
Mean 109 56 253
Median 106 52 229
High 145 92 431
Low 81 21 99
Comparable Company Analysis:
Comparable company valuation analysis is also used to evaluate the value of the company by using the metrics of other similar size companies in the same industry. It operates under the assumption that all the similar companies will have similar valuations multiples. The result from the comparable are:
EV/EBITDA
Mean 87
Median 82
High 128
Low 56
Discounted Cash flow Analysis:
Discounted Cash flow is also a valuation method, which is used to estimate the attractiveness of an opportunity to invest. It uses free cash flows projections and then discounts them to arrive at a present value estimate which is used to evaluate the investment. The value of the company with the discounted cash flow method is $215 million. The assumptions that are taken include the long term growth rate for the company as 5%. The average beta of the competitors is used to find out the cost of equity.Currently, the company has no long term debt therefore, the cost of debt is not taken and cost of equity is used as the cost of capital.
DCF Valuation
2000 2001 2002 2003 2004
EBITDA 14.00 17.20 19.80 22.90 26.70
Capex 0.70 4.10 3.70 4.70 5.20
NWC -3.23 3.09 2.04 1.01 -2.55
Tax 3.675 4.095 4.935 5.985 7.28
FCF 12.86 5.91 9.12 11.21 16.77
Terminal Value 293
PV $11.58 $4.80 $6.67 $7.38 $184.07
Enterprise Valuation $215
Long term Growth rate assumed 5%...........................
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