1.1. Valuation methodology
ACC is using LBO approach for its acquisitions and desires to maintain this acquisition policy for its latest target AirThread Connections (AC). According to this approach, AC will be financed significantly by debt which will obviously breach leverage ratios maintained by Air Thread/ACC. ACCs plans to bring down the leverage ratio to industry standards steadily to sustainable levels between the years 2008-2012.
Owing to the uneven capital structures between 2008 and 2012, it will be prudent not to deploy WACC to value the target but value the target using APV. Additionally, WACC computation might be difficult to use since an adjustment discount rate each year the capital structures change. Assuming…show more content… Estimated terminal value
After 5-years, a bullet payment to discharge the debt will be made, and hence the terminal value can be estimated using WACC. The terminal value is 4 286,4.
Un-Levered Free Cash Flows: 2008
2009
2010
2011
2012
NOPAT
243,5
277,6
334,6
387,1
434,6
Plus: Depreciation & Amortization 705,2
804,0
867,4
922,4
952,9
Less:
