FIN 630 Final Exam 2014

1-Choose several peer companies for and justify your choice. Choose several valuation multiples and using comparable ratios of peer companies (as we did in Project 2 and discussed in Conferences) and financial information from prospectus, estimate the company’s stock price on March 6, 2014. It is required for this question to list your major assumptions and properly reference sources of information that you used in your calculations.

2 – Using the same peers and industry data, please estimate ‘s WACC Show all your data used for calculations. Again, please state all your assumptions and sources of information.

3 – went public on March 7, 2014. How do your relative valuations compare to the company’s IPO price (what was the IPO price)? How do they compare to its first trading day opening and closing prices (what were these prices)? If your valuations differ from observed prices, can you briefly forward any possible explanations?

4 – In June 2011 SMALLCAP World Fund, Inc. acquired 3,276,690 series B preferred shares at a price of $13.73 per share. According to the IPO prospectus, at IPO the each series B share will be converted to 1 (one) common share. If SMALLCAP World Fund, Inc. participated in IPO and could sell some of these shares at the IPO price, what would be its annualized rate of return on this investment? You may assume the investment date to be exactly 33 months (11 quarters) earlier, or use the XIRR function – – one solution is enough! Did SMALLCAP World Fund, Inc. sell any shares at IPO in reality? Why/why not?

5 – The following information is for pedagogical purposes only and unlike earlier questions does not deal with real situation. There are rumors has a three year agreement with a major mobile network, according to has a right to advertise coupons to users of this network by paying annual fee of $50 M at the beginning of the year. Once usage starts, it cannot be terminated until the end of the contract, but the start can be postponed. The current estimate is that if the company uses the network this year, its revenues will be $60 M in today’s dollars. Each year revenues can go up 20% or down 15% in comparison with the previous year. If the risk-free rate is 5%, what should the company do? Please provide as many details as possible in your explanations and support them by numbers.

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