BRIEF CASES - Valuation of AirThread Connections by Erik Stafford and Joel L. Heilprin
Study Questions:
1. Describe the methodological approach that should be used to value AirThread (WACC, APV or some combination). Estimate the cash flows from 2008 through 2012 along with the terminal value. Should the non-operating investments in equity affiliates be accounted for in the valuation?
2. What discount rate should Ms. Zhang use for the un-levered cash flows for 2008 through 2012? Is this the same discount rate that should be used for the terminal value?
3. Estimate the long-term growth rate that should be used for AirThread's terminal value. Using your estimate of long-term growth, what is the present value of AirThread's going concern value in 2012?
4. What is the enterprise value of AirThread before considering any synergies?