| Equity Valuations using Multiples and Transactions | |||||||||||||||||||||||||||||
| EPS | BV | Sales | EBITDA | Premium | |||||||||||||||||||||||||
| Synergy | |||||||||||||||||||||||||||||
| Historical Multiples: | |||||||||||||||||||||||||||||
| – Average | 14.00 | 3.00 | 2.00 | 10.00 | 40.0% | 20.0% | Jaguar shares o/s (M) | ||||||||||||||||||||||
| – Median | 13.50 | 2.50 | 2.20 | 9.00 | 30.0% | 15.0% | 75.00 | ||||||||||||||||||||||
| Last 4Q | Est. | 2021 | Est. | 2022 | |||||||||||||||||||||||||
| Jaguar EPS | 4.84 | 4.91 | 5.69 | ||||||||||||||||||||||||||
| Maximum | |||||||||||||||||||||||||||||
| Minimum | |||||||||||||||||||||||||||||
| Book Value | |||||||||||||||||||||||||||||
| Jaguar Book Value | 32.46 | ||||||||||||||||||||||||||||
| Jaguar Sales (Last 4Q) | 3,722 | ||||||||||||||||||||||||||||
| Average Sales Multiple | |||||||||||||||||||||||||||||
| Firm Value | |||||||||||||||||||||||||||||
| Debt Value | 2,094 | ||||||||||||||||||||||||||||
| Equity Value | |||||||||||||||||||||||||||||
| Jaguar EBITDA (Last 4Q) | 1,017 | ||||||||||||||||||||||||||||
| Average EBITDA Multiple | |||||||||||||||||||||||||||||
| 8,076 | |||||||||||||||||||||||||||||
| Pre-Announcement Stock Price | 71.00 | ||||||||||||||||||||||||||||
| 2020 | Dividends | |||
| Growth/yr. | ||||
| Northern | 3.66 | 3.0% | ||
| Eastern | 2.25 | 4.4% | ||
| Central | 1.15 | 3.9% | ||
| Dividend Stream | ||||
| TV | ||||
| DDM Value of each Firm | ||||
| $/share | ||||
| JTM WACC | 7.0% |
| No content – Intentionally left blank |
FINE 332 | Jan ’22 | worldwide.erau.edu
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FINE 332
Corporate Finance I
Module 6 Problem Set
Multiples and Transactions, Dividend Discount Module
All the data you need is in the template provided to you.
1. JTM Airlines is looking to buy Jaguar Airlines. Your boss, the CFO, wants a quick and dirty valuation of
Jaguar. You choose to look at past transactions in the airline industry to get some numbers and put
them in an Excel spreadsheet. For Jaguar, you find out the firm’s key financial values and put them in
the spreadsheet. To remind yourself that they are inputs, you should color them red.
Using EPS, Book Value (BV), Sales, EBITDA, Premium and Synergy over stock price, what should
be Jaguar’s prices per share?
2. Your boss is piling on the work and has asked you to value three more potential acquisitions. They are
of Northern, Eastern and Central, fixed base operators serving areas where JTM is looking to expand
(the names give away the regions of the country). You don’t have cash flow data for these firms as
they are privately held, but you talked to the owners and they gave you dividend information for the
firms, which you entered into your spreadsheet. You remember back to your corporate finance class
that you can use the Dividend Discount Model (DDM) to come up with a quick and dirty valuation.
You know JTM’s WACC and will use this as the applicable discount rate. Using the DDM Model, what
are the values per share of each of these three firms?
