CASE STUDY 4: PAGINAS AMARALES VALUATION
AFF5300 Case Studies in Finance- March 2013
Juan Lopez, a new associated of JP Morgan’s Latin America M&A Group was given a responsibility to value the telephony directory businesses in Argentina, Brazil, and Chile of Paginas Amarelas. The aim of this report is to use the fundamental approach to help Lopez to estimate the value of these three units within Paginas Amarales. This analysis adopted the discount cash flow (DCF) approach. The analysis firstly determined the long term perpetuity growth rate to determine the terminal value in the DCF valuation. To derive the DCF, it is critical for this analysis to obtain the discount rate. Thus, it estimated the Weight Average Cost of Capital (WACC) as the discount rate. To estimate the WACC, the following inputs are estimated to generate the WACC of each country: cost of debt and the dost of equity, and the debt to value ratio and equity to value ratio. After the analysis obtained the discount rate of each country, the DCF values of the three countries were estimated. This analysis generates the value of $208, 260,206 in USD of the three units within Paginas Amarales. There are some flaws in using the models and approaches to generate the inputs which had been discussed. However, due to the insufficient and the limitations of data and information, it is difficult to provide the precise valuation. Nevertheless, this analysis generated a close approximation which is still a good guide to observe the valuation of Pagina Amarelas.
By: Tam Huynh (24675512)
Table of Contents
2.Valuation Analysis’s Assumptions2
3.Determination of Long Term Perpetual Growth Rate3
4.Cost of Debt Estimation3
5.Cost of Equity Estimation3
5.1.Determining Risk-Free Rate4...