Major HBR cases concerns on a whole industry, a whole organization or some part of organization; profitable or non-profitable organizations.
Hire Writer Brasilia Investments what the appropriate action would be, given the information available to them in Expected future events and forecasting techniques, together with the company performance results are used to perform appropriate valuations.
The options available to Brasilia Investments would be the sale or restructuring of Vaginas Marvels. In order to value Vaginas Marvels, future cash flows would need to be projected, a long run perpetual growth rate would need to be determined and the weighted average cost of capital WAC would need to be calculated using the cost of debt and he cost of equity.
The future cash flows have been projected by Juan Lopezbut the perpetual growth rate of free cash flows after needs to be determined.
An analysis of the industry shows that the growth in the industry will not be constant afterand thus a medium term growth and a long term perpetual growth rate is used. The medium term for Vaginas Marvels is defined as the time period when demand for telephone lines is growing rapidly, and the long term as the period when the demand for new telephone lines is fairly stagnant.
An analysis of the industry wows that the medium term will present robust growth rates, and to calculate only a long term constant perpetual growth rate would undervalue the company as this unsustainable high growth would have to be overlooked to allow a lower, more sustainable, long term growth rate.
The free cash flows will be discounted to their present value using WAC, the cost of debt used will be the local borrowing rate, and the cost of equity will be calculated using the Godlier and Espanola method.
US Dollar borrowing rates are given, and using the Dollar cost of capital and dept to equity ratio, a Dollar WAC can be calculated to discount the Dollar denominated free cash flows.
The value of operations of Vaginas Marvels will be calculated for each country, and the sum of these values will give the total value of operations of Vaginas Marvels. This is simply for accuracy reasons, as different countries expose Vaginas Marvels to different risks, or in some cases the same risk but to a different extent.
The growth rate will determine the future cash flows, and will take into account the factors which effect the industry unsystematic.
The WAC, or more pacifically the cost of capital, will take into account the risks of investing in the particular country the systematic risks.
Note that the systematic factors that will affect the value of Vaginas Marvels will be taken into account in the cost of capital, and thus the discount rate, and to include these systematic factors in the growth rate would result in double counting, and thus a lower value for Vaginas Marvels will be lactated than what should otherwise be the case.
Juan Lopez calculated the free cash flows FCC for Vaginas Marvels for the next eight years, and took into account many factors that would affect the telephone directory industry in the relevant countries.
Although ten nominal gar town rates AT arc-yes In ten local currency are not equal between the three countries, adjusting for inflation differences between the countries results in the real growth of Offs being the same for all countries. Juan Lopez should be criticized for using the same growth rate for all three countries, as here are different factors, other than inflation, which affect the cash flows.
We do not, however, have enough information to calculate a more accurate growth rate for each country within the period We will, however, slightly adjust the average short term growth rate for each country when determining a long term perpetual growth.
These adjustments will largely be due to competition, and demand for telephone lines in the countries. We do also consider the fact that a firm cannot maintain high growth rates in perpetuity due to the mathematics of the calculation of growth rates: A company cannot grow at higher rates than GAP growth in perpetuity, thus further substantiating the claim that long term perpetual growth must be prudent.
For this reason a medium term growth rate is used to allow for a period of higher growth. The free cash flows Offs are calculated by taking the operating profit, subtracting tax and adding back non-cash items, giving the operating cash flow.
A decrease in net working capital is subtracted or an increase added from the operating cash flow, and finally net capital expenditure is subtracted to give the free cash flow. Vaginas Marvels will not have large non-cash items, as the depreciation in only constituted 0.
Therefore the major factor determining the growth of Offs would be the growth of operating profit, and for this reason this paper focuses on the growth of operating profit when determining the growth rates for each country.
Growth in the Telephone Directory Industry The long term growth in the telephone directory industry is constrained by the demand for advertising. The demand for advertising in the telephone directory industry is mainly affected by two factors; namely the competition in all industries, and the demand for telephone lines.
These two factors are the main drivers of FCC growth in the telephone directory industry. With this general increase in competition comes an increase in demand for advertising as companies are constantly trying to differentiate themselves from their competitors.
In an attempt to capture some portion of the market, companies will have to increase their advertising budgets, as in a competitive industry the perspectives of the consumer are critical to gaining market share.
Therefore there are very positive prospects for growth in the telephone directory industry as telephone directories are essentially an advertising LOL, and most probably would be viewed as the primary advertising tool, I.
Assuming the first form of advertising a firm would undertake would be to advertise in the telephone directory. This increase in demand will increase the quantity of advertising space demanded but unfortunately, due to competition within the telephone directory industry, the price should fall, thus decreasing profit margins.
Although profit margins will fall, it is uncertain whether this will result in a decrease or increase in total operating profit. In order to determine which force will dominate n economic model incorporating the number of firms and elasticity will be used.This case serves as a basis for student discussion of the estimation of the required rate of return (ROR) on investment in emerging markets.
An associate at JP Morgan Latin America M & A department (mergers and acquisitions) is the task of assessing the directory operations (“paginas amarelas” means “Yellow Pages”) assigned by a large Brazilian conglomerate. Paginas Amarelas Harvard Case Study Solution and Analysis of Case Study Solution & AnalysisIn most courses studied at Harvard Business schools, students are provided with a case study.
Major HBR cases concerns on. PAGINAS AMARELAS Case Solution. Argentina. It is the second largest economy in Latin America. The country was in a state of recovery as it suffered great damage . The case argues that in the short run, advertisers are very price sensitive, but elasticity are not continuous throughout time.
One would then expect the long run price elasticity to e lower than that of the short run, with the elasticity tending towards inelastic (O) in . PAGINAS AMARELAS Case Solution.
Brasil Investments was a conglomerate in Brazil that was worth billions of lausannecongress2018.com company hired J.P Morgan & Company, a financial intermediary, to advise the company regarding their phone directory business that was operated in three different countries as their subsidiary company “PAGINAS AMARELAS”.
This case serves as a foundation for student discussion of the estimation of required rates of return (ROR) on investments in emerging markets. An associate in J.P. Morgan's Latin America M&A department (mergers and acquisitions) is assigned the task of valuing the telephone directory operations (“paginas amarelas” means “yellow pages”) of a large Brazilian conglomerate.