Airthreads Essay

1978 Words Oct 24th, 2013 8 Pages
The Valuation of AirThread Connections
We can use a combination of APV and WACC approach to value AirThread Connections – using APV for 2008-2012, and using WACC to estimate the terminal value.
Use APV approach to value cash flows from 2008 to 2012
America Cable Company (ACC) should use APV approach to value cash flows from 2008 to 2012. This is because ACC uses classis LBO approach for acquisition where it purchases the target with significant amount of debt, and then in the long run paid the debt to bring down the leverage to industry norms. The goal is to use a tax efficient route and maximize the present value of tax shields, and minimize the amount of up-front equity invested in the deal.
Use WACC approach beyond 2008 to
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Rev. 154.36x 154.36x 154.36x 154.36x 154.36x
Total Sales Equip. Rev. 101 134.98 153.85 173.10 190.42 203.76
Prepaid Expenses 1.38% 1.38% 1.38% 1.38% 1.38%
Total Prepaid Expenses 41.6 46.92 53.48 60.17 66.19 70.82
Accounts Payable 35.54x 35.54x 35.54x 35.54x 35.54x
Total Accounts Payable 260.8 335.42 382.38 430.18 473.20 506.33
Deferred Serv.
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