1. What do you believe McCaw is worth? Prepare a cautious DCF using the financial forecast of FCFs given in the crusade and in the associated spreadsheet. What key assumptions determine the range of high and disordered values in your valuation analysis? Also commence on any other valuation approaches and information that you can. For the rice beer of consistency, all groups should use a (low, Darden) risk premium of 5.5%.
We performed a DCF Analysis for two scenarios: 1) assuming the purchase of the residual candour of LIN publicize; and 2) assuming the sale of the residual equity of LIN Broadcasting (See Exhibits 1 & axerophthol; 2). The most critical assumptions impacting value were: 1) give notice rate and 2) terminal growth rate. We relied on discount order between 10.0% and 11.0% based on our analysis of the stand solo AT&T WACC (10.4%), the stand alone McCaw WACC (12.3%), and a blended calculation (11.1%). We chose growth rates between 3.0% and 4.0% as an estimate of the perpetual growth of FCF (implied Value/POP was approximately $300, high by industry standards) (See Exhibit 1). In adjunct to a DCF Analysis, we performed analyses of modern comparable operations (See Exhibit 3) and new-made premiums paid for publicly traded companies (See Exhibit 4).
Results revealed that comparable transactions were punish at approximately $171 / POP and that recent deals were consummated on average at approximately 50% above 12 month average stock prices. In our opinion, the analysis of recent premiums paid is not reliable; as we are not able to evaluate the comparability of the included transactions (i.e. the contemplated transaction is large).
2. What are the advantages and disadvantages of a combination between McCaw and AT&T? What is your best alternative to a negotiated agreement with your counterparty?
Advantages of a combination between McCaw...
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