Infratel is an unlisted telecom infrastructure company operating in India. Airtel a large telecom player is...

 

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Infratel is an unlisted telecom infrastructure company operating in India. Airtel a large telecom player is planning to acquire Infratel in a negotiated deal with the Infratel management. Airtel hires you as their valuation consultant on valuation of Infratel. Following data about the comparable firms of Infratel is collected: (5 Marks each) Company Ericson Embratel Tele Support Regression based equity D/E Ratio beta 1.4 1.2 1.12 0.8 0.68 0.78 Infratel being a small company has a very low debt/equity ratio of 0.25. Using the data of the comparable firms and Infratel calculate the followings: 077 0-714 0629 Tax 1. Unlevered betas for all the three comparable firms in telecom infrastructure industry. 2. Median unlevered beta for the industry, use this beta to calculate levered beta for Infratel. 3. If median adjusted R² for the comparable firms' regression beta was 0.40, calculate total beta for Infratel using levered beta calculated in step 3 and adjusted R² for the comparable firms. 4. If risk free rate is 4% and market risk premium is likely to be 6%, calculate appropriate discount rate for Infratel (a) Using normal levered beta calculated in step 2, and (b) Using total beta calculated in step 3. CL 0° Infratel is an unlisted telecom infrastructure company operating in India. Airtel a large telecom player is planning to acquire Infratel in a negotiated deal with the Infratel management. Airtel hires you as their valuation consultant on valuation of Infratel. Following data about the comparable firms of Infratel is collected: (5 Marks each) Company Ericson Embratel Tele Support Regression based equity D/E Ratio beta 1.4 1.2 1.12 0.8 0.68 0.78 Infratel being a small company has a very low debt/equity ratio of 0.25. Using the data of the comparable firms and Infratel calculate the followings: 077 0-714 0629 Tax 1. Unlevered betas for all the three comparable firms in telecom infrastructure industry. 2. Median unlevered beta for the industry, use this beta to calculate levered beta for Infratel. 3. If median adjusted R² for the comparable firms' regression beta was 0.40, calculate total beta for Infratel using levered beta calculated in step 3 and adjusted R² for the comparable firms. 4. If risk free rate is 4% and market risk premium is likely to be 6%, calculate appropriate discount rate for Infratel (a) Using normal levered beta calculated in step 2, and (b) Using total beta calculated in step 3. CL 0°

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Answers 1 Unlevered Betas for all the three comparable firms in telecom infrastructure industry CompanyRegression Based Equity BetaDE RatioUnlevered B... View the full answer