MT480 Corporate Finance

Deltacom Ltd. is a telecommunications consultancy company based in Ghana that trades globally.  It was established five (5) years ago.  The ten (10) founding shareholders own 10% of the issued equity capital each and are also Executive Directors of the company.

The shareholders are considering a flotation of Deltacom Ltd. on the Ghana Stock Exchange and have started discussing the process and a value for the company with Financial Advisors.  The ten founding shareholders and many of the company’s employees are technical experts in their field, but have little idea how entities such as theirs are valued. 

At a meeting with the shareholders, the Chief Executive Officer of the Company believes that as the company has assets with a book value of GH¢22,000 million and a surplus of more than GH¢10,000 million, the company’s value, when listed should be at least GH¢32,000 million. The company’s financial statements for the past three years are summarized below.

Critically evaluate alternative investment appraisals techniques and decide appropriate actions accordingly

Acting as an external consultant to Deltacom, prepare a report for the shareholders that uses a variety of methods to value the firm.  In particular the report should include/address the following features:

1.Brief introduction which explains the purpose of the report and why you have been contracted.

2.A brief discussion on the assessment of the accuracy of the Chief Executive’s assessment of the company’s value.

3.Explanation of each of the methods used in estimating the value of the company including the advantages and disadvantages of the methods.

4.A summary of the methods used and the value obtained including an appendix indicating the calculations you did in arriving at the values and any assumptions you made.

5.Matters that should be specified in the prospectus that Deltacom will issue to the public as a requirement for listing on the Ghana Stock exchange.

6.Evidence of reading, grammar, spelling and good presentation and referencing