CASE44 GROUP3 Essay - 957 Words

Suggested Questions for Arcadian Microarray Prepare to explain the implications of case Exhibit 1 (Paige Simon’s first task). Based on that exhibit, is terminal value a material component of firm values? Drawing on case Exhibit 4 and your own general knowledge, where would the various estimators be appropriate? Where would they be inappropriate? (Simon’s second task) Regarding the cash flow forecasts in case Exhibit 5, at what point in the future would you set the forecast horizon for the three investments? Why? More generally, what should determine when you stop forecasting annual cash flows and estimate a terminal value? Estimate other terminal values based on alternate estimation approaches. From these various estimates, please†¦show more content†¦4. There are three ways in estimating terminal value; these are through P/E ratio, P/B ratio, and Constant growth. Then, we first have to determine their growth rate using Fisher formula [(1+g)x(1+inflation)]-1. With population growth rate 1%, economic growth rate 3%, and pharmaceutical growth rate 5%, we can get nominal rate :population: [(1+0.01)x(1+0.02)]-1 = 3% economic: [(1+0.03)x(1+0.02)-1 = 5% pharmaceutical: [(1+0.05)x(1+0.02)]-1 = 7% our group chooses economic nominal rates 5% as input for constant growth estimation. I. PRICE EARNINGS RATIO Arcadian View Sierra View P/E 15 15 WACC 20% 20% net income $203.00 162 Terminal Value $3,045.00 $2,430.00 PV of terminal value $491.78 $327.05 PV of FCF 2005-2014 $(151.82) -118.38 Net Present Value $339.96 $208.67 60% ownership $203.98Show MoreRelatedCASE44 GROUP3 Essay examples938 Words   |  4 Pagesï » ¿Suggested Questions for Arcadian Microarray 1. Prepare to explain the implications of case Exhibit 1 (Paige Simon’s first task). Based on that exhibit, is terminal value a material component of firm values? 2. Drawing on case Exhibit 4 and your own general knowledge, where would the various estimators be appropriate? Where would they be inappropriate? (Simon’s second task) 3. Regarding the cash flow forecasts in case Exhibit 5, at what point in the future would you set the forecast horizon for the