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Instructions
Duration 3 hours
Please show all workings – marks will be given only if all workings/calculations are shown clearly
You should also include clear explanations/justifications of your workings/calculations wherever required
No clarifications will be given during the exam. In case of any ambiguity, please make assumptions and mention them cl
Submission procedure
Please remove the file password before submitting the file
Your final file should be named "Roll number_Short name"
Your answer file should be uploaded on Google Classroom no later than 10 minutes from the end of the exam
Read the case "Valuation of AirThread Connections" (Case Exhibits are in this Excel file). Assume that you are Jennifer Zhang.
The following points may help you:
A careful reading of the case takes around 20-30 minutes. Read the case twice and make a note of important points before you s
Remember that WACC assumes that the capital structure (D/V) remains fixed whereas APV assumes that the debt amount is kn
WACC for some periods and APV for some periods
It's a good idea to value operating and non-operating assets separately
Valuation is an estimate. A range is always better than a point estimate
Don't forget to put your thinking cap on!
AIRTHREAD ACQUISITION Operating Assumptions
Operating Expenses:
System Operating Expenses 838.9 956.3 1,075.8 1,183.4 1,266.3
System Operating Exp./Service Revenue 20.0% 20.0% 20.0% 20.0% 20.0%
(1) Includes investments in property, plant & equipment, as well as licenses and customer lists.
1) Equity betas were estimated on a weekly based on weekly stock returns over a three year period.
Note: The current industry and competitor leverage ratios reflect the historical averages that existed over the past three years.
Harvard Business Publishing