question archive In the event of an IPO what would be the market price of shares of the LAB Research division? a)Using Comparables - Select appropriate comparables
In the event of an IPO what would be the market price of shares of the LAB Research division? a)Using Comparables - Select appropriate comparables
Subject:FinancePrice: Bought3
In the event of an IPO what would be the market price of shares of the LAB Research division?
a)Using Comparables - Select appropriate comparables. Then select appropriate and/or useful valuation multiple(s). Suggest a valuation range for the Lab Research Equity value
b)Using a DCF valuation approach -
i. Establish FCFF estimated through 2010 for 5 years (start with Ex 10).
ii. Estimate terminal cash flow assuming a 4% growth rate for this period.
iii. Then, calculate appropriate discount rate (see the Note for Question 6 b. at the end of this pdf.)
iv. Finally, Estimate the Lab Research's Equity Value. (Note that your final estimate will not be equal to C$65,000,000, which was just suggestion to use as an assumption as described in the Note for Question 6b. You will find the Note for Question 6b at the end of this pdf.)
c) Conduct sensitivity analysis on your DCF by estimating the Lab Research equity value's sensitivity to changes in
i. Create 3x3 matrix illustrating the sensitivity of the equity value from your DCF by using the following terminal value growth rate (3%, 4%, 5%) and discount rate (9%, 11%, 13%) assumptions.
d) Select a final equity value range for Lab Research division based on your answers to 6 a, b and c.
