Teuer Furniture

ASSIGNMENT SUBMISSION FORM

ISB Honour Code 

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Treat this as the first page of your assignment

Course Name: CORPORATE FINANCE

Assignment Title: CASE 3 – Valuation of AirThread Connections

Submitted by: GROUP G15

Group Member Name | PG ID |

Aditi Mittal | 61310666 |

Jyotsna Mahara | 61310500 |

Sahil Dhar Hakim | 61310491 |

Sumit Pokhriyal | 61310475 |

Vishal Lahoti | 61310231 |

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SOLUTION

Assumptions taken for calculations :

1) While calculating unlevered β for comparables, we assumed the debt to be a post-tax value.

2) Comparable companies’ revenues are lower than AirThread so it seems better to take the average of all the companies’ Beta.

3) D/E ratio is changing year to year so it is better to evaluate the firm using APV.

We have used below mentioned figures while calculating unlevered cost of equity

i. Marginal Tax Rate 40%

ii. Debt Beta 0.00(assuming debt at market risk free)

iii. Market Risk Premium 5.00%

iv. Risk Free Rate 4.25%

v. Cost of debt 5.5%

4) for the calculation of terminal value, we can take the long term growth rate of free cash flows at 3% which is a growth rate of a developed economy.

5) Cash flows can be calculated by EBIT(1-Tax%) + Depreciation – Net Working capital. Since, we...