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Valuation of Kayak PART II Calculate the stock...




Valuation of Kayak PART II Calculate the stock price for Kayak, and provide the needed analysis as asked in what follows. You will need to use ?Sources of Financial Data? listed below to obtain the necessary financial info/statements for Kayak identify its peer companies and obtain pricing and financial information for them. For some parts of the exam you might already have numbers from the previous exercise. Please make adjustments in response to comments, as necessary. A. Develop a DCF model using Excel to estimate the fair value of the firm?s common shares on October 31, 2012 ? for historical numbers you may use the data from SEC filings including S-1 form with all amendments and 424B4 form (Prospectus), and other sources of financial data. Don?t forget to include the terminal value (value after the forecast period) in your estimate. B. For each of the value drivers (i.e., revenues growth and profit margin over the forecast period, tax rate, WACC etc.), identify your sources and assumptions, and show all you calculations. This is especially important for the WACC that you will use to calculate the NPV, due to the sensitivity of your results to this critical parameter. Perform sensitivity analysis of stock price to WACC, revenue growth and other inputs, which you consider important. C. On November 8, 2012 it was announced that Kayak will be bought by How close is your valuation in part A. to the company?s purchase price? If your valuation differs from the purchase price, can you provide possible reasons? D. On June 30, 2004 Kayak issued Series A preferred shares at $1.00 per share. Preferred shareholders would receive 6% annual dividend on each anniversary of their investment until conversion of preferred shares to common shares. In July 2012 IPO these shares were converted to common shares with the conversion ratio of 1-to-1. If no dividends were skipped and investors sold their shares at IPO price, what was the annualized return of Series A investors? You may assume investment date to be exactly 8 years earlier, or use XIRR function. E Recently has entered into a Lease Agreement (the "Lease") with Sequoia LLC (the "Landlord") to lease office buildings (the "Premises"). Because the Premises are not yet under construction, will not be obligated to pay rent until three months after the Landlord makes the Premises available to (the "Delivery Date"). The Delivery Date is estimated to be July 2014, and anticipates that the Lease term and its rental obligations will initiate in October 2014. The Lease will expire in September 2026. Under the Lease, rent will be paid on a monthly basis at $1.8 million per month. The Landlord is negotiating with several contractors to build the property. Contractor 1 bids $60 million and can start work immediately to finish it by July 2014. Contractor 2 cannot bid right now, because of another ongoing project. In three months Contractor 2 will know for sure whether it can bid or not. If it bids, the bid will be $ 40 million. However, if Contractor 2 does not bid, the Landlord will have to hire Contractor 1, thus losing 3 months (the rent payments will start in January 2015, but the lease will still expire in September 2026). There is a 60% risk-adjusted probability that Contractor 2 will formally bid. The annual risk-free rate is 2.4%. What is the value of option to delay? What should the Landlord do? (Conditions of the actual lease agreement have been modified for pedagogical purposes).


Paper#7051 | Written in 18-Jul-2015

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