FIN 3003 Corporate Finance

Question 1: Your group is required to: Calculate the following market multiple ratios for Etisalat at its 2020 financial year-end: EV/EBITDA Price-to-earnings ratio (PE ratio) Price-to-book ratio Contrast and explain the results of the different market multiple ratios that you calculated. Compare the PE ratio you calculated for Etisalat with relevant benchmarks (e.g. with another telecom firm in the UAE, or the PE ratio of other telecom companies in other comparable markets) Evaluate the usefulness of market multiple ratios in company valuation.   

Question 2:  Your group is required to: Calculate the NPV of the SEH project based on the Government’s estimate of the franchise cost. Show NPV including and excluding the terminal value. Calculate the IRR of the SHE project. Show IRR for the SHE project including and excluding the terminal value. (Use the Excel IRR function to calculate IRR). Based on your calculations in (a) and (b) indicate whether SEH should invest in the project. Consider the impact of the terminal value in your evaluation. Calculate the payback period of the SEH project by excluding the terminal value.Based on the payback period calculated in (d), should SEH bid for the project on the basis of the Government’s estimate of the franchise cost? Estimate the maximum price which SEH could bid for this new franchise given that competition is expected to be strong for this project (by ignoring the company’s 5 years’ payback period target). Include terminal value in your estimate.   

Question 3: Your group is required to:  Explain whether it is better for SEH to base its bid price on the NPV method or Payback method – you need to explain the advantages and disadvantages of the two methods, which one would you recommend and why? (No calculations required) Consider the risk factors associated with each project, and in view of these advise your client on which project is likely to provide value for its shareholders.