C
and C airline
Discount rate:
Discount rate:
Using the Beta we can find the asset
beta of the firm
1.3*(4/4.7)+0.15(0.7/4.7)=1.13
Using CAPM we can calculate the
discount factor by
5+(12-5)1.13=12.9
NPV:
Using the information of passengers we
can say that:
|
Year 1 |
220*(1*0.1+0.8*0.5+0.5*0.3+0.4*0.1)=151.8 |
|
Year 2 |
220*(1*0.15+0.8*0.6+0.5*0.2+0.4*0.05)=165 |
|
|
t
|
t1
|
t2
|
t3
|
|
Income |
|
13,378
|
14,832
|
15,129
|
|
Sterling cost |
|
2,987
|
3,077
|
3,169
|
|
Overheads |
|
600
|
600
|
600
|
|
Fuel cost |
|
2,855
|
2,969
|
3,087
|
|
|
|
6,936
|
8,186
|
8,273
|
|
Tax on
operating cash flow |
|
2,081
|
2,456
|
2,482
|
|
Capital cost |
19,608
|
|
|
10,159
|
|
Tax on
capital allowances |
|
1,471
|
1,103
|
261
|
|
|
19,608
|
6,326
|
6,833
|
16,211
|
|
Discount
factor 13% |
1
|
1
|
1
|
1
|
|
Present
values |
19,608
|
5,598
|
5,351
|
11,234
|
|
NPV |
2.575m |
|
|
|
REPORT
Economic
factors:
The
major economic factor which can bring a change is the interest rate.
Any fluctuations in the interest rate will affect the company’s
decision. The cost of borrowings money will be too high if the
interest rate increases.
Commercial
aspects:
Commercially
the most important thing are the tourist in the season. If they are
well attracted towards these areas for their vacations. This will
bring more revenue to the company. There will be other service
providers in the market on the same route and they should be kept
under consideration as regard to their prices and tickets etc,
Strategies
dealing with risk:
Hedging
and exchange rates and possibly fuel forward to mitigate the effect
of rising prices. Aim for a mixed demand of tourist and business
visitors in the long-term consider whether an alliance could be made
with larger airlines that do not fly to the destinations. Access the
impact on the viability of the investments of a lower resale value
and consider the possibility of agreeing a deal now to make place in
the year 3 times.
Hi-Clean
|
|
Public
sector
|
Hotels
|
Total
|
|
|
Sales revenue |
104.9
|
131
|
235.9
|
|
|
Direct cost |
57.96
|
65
|
123.19
|
|
|
Gross profit |
47.21
|
65
|
112.71
|
|
|
Fixed
overheads |
31.93
|
39.87
|
71.8
|
|
|
Operating
profits |
15.28
|
25.63
|
40.91
|
|
|
Interest |
|
|
1.5
|
|
|
|
|
|
39.41
|
|
|
Taxation |
|
|
7.09
|
|
|
PAT |
|
|
32.32
|
|
|
Dividends |
|
|
9.69
|
|
|
RE |
|
|
22.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
revenue |
|
|
|
|
|
Public sector |
[(102*0.55)+(112*0.45)*0.6+[(95*0.5)+(110*0.5)]*0.4 |
|||
|
|
=104.9 |
|
|
|
|
Hotels |
(1239*0.6)+(143*0.4)
= 131 |
|||
Gross
profit is forecasted to grow at a faster rate than the fixed assets
costs. As this will lead to an increased operating profit and as
interest cost are falling the constant payout ratio will lead to an
increase in dividends of 15%.
We
can value the company by adding the value of all the assets less
liabilities of the company. This would give 147m at the end of 2004
and a further 22.63m of RE. However this does not take account of the
value of the future revenue streams as it make no allowance for the
goodwill that has been generated by the business. In additions the
asset value of building land and other fixed assets may not be up to
date.
We
could value the future projected dividends by discounting the
forecast the industry cost of capital is 9% and to estimate growth we
can use the past growth. As earnings have grown by 20% each year and
dividend payout ratio has remained constant at 30%,
By
using dividend growth model.
9.69/0.09 = 107.7m
As this is less than the asset
valuation it is not very reliable with 5% growth it would give
9.69*1.05/0.09*0.05
Earning capitalization:
We would assume steady earnings which
are all paid out rather than only 30% giving
32.32/0.009 = 359m
Earning multiple
The industry PE ratio is forecast to be
somewhere between 12 and 15
|
P/E
ratio |
12
|
13
|
14
|
15
|
|
Value
|
388
|
420
|
452
|
485
|
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