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This case deals with the valuation of Hongxing Aut...

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Question

This case deals with the valuation of Hongxing Auto Sales and Service, a small, privately owned business. New car sales represent over 70 percent of the revenue and car service represents the remaining portion. You will calculate the firm's value using several different valuation methods and recommend a price that is reasonably reflects the existing state and prospects for this company. Assigned Questions (include spreadsheet exhibits to support your response): 1) How much is the company worth if all assets are liquidated, the liabilities are paid off and the business is shut down? (25-pts) 2) How much is the business worth, taking into account the future cash flows it may generate for the new owners? For purposes of this analysis, assume no future growth. (25-pts) 3) As an advisor to the Li family, what price would you recommend as being reasonable? Explain your rationale. (30-pts) 4) If I were to tell you the gross profit per used car at Carmax is approx. $2,216, then name two ways they could increase that profit level over the next twelve months (10-pts). Explain whether or not you expect used car prices to be down next year at this time (consider used car pricing trends at ww.manheim.com). Should Carmax lower its gross profit/car to drive volume and an appropriate operating income payoff? (10-pts) Valuation models : Liquidation Valuation model (book value model) Gross up land value pay extra care for this

 

Paper#1721 | Written in 18-Jul-2015

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