Altice USA Inc. (ATUS) is a publicly-traded cable television provider headquartered in New York City. Currently,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Altice USA Inc. (ATUS) is a publicly-traded cable television provider headquartered in New York City. Currently, Altice's market capitalization is $20 billion and its debt is $26 billion. Its equity beta is 1.10, and its debt is rated BB- with a beta of 0.17. Lumos Networks is a privately-held fiber-optic telecommunications provider based in Charlotte, North Carolina. Altice is contemplating the possibility of acquiring Lumos as a way to get into the fiber-optic business, which is currently missing from its line of products. You have been hired to advise Altice's CEO, Dexter Goei, about the value of Lumos. For this purpose, you have produced the following projections for Lumos over the next two years. [Assume that time 0 (today) is 2020, time 1 is 2021, etc., and that all figures are in $million.] Operating Revenue System Operating Expenses Selling, General & Administrative (SG&A) Depreciation 2020 EBIT in 2020 (in $million) Price per Share Shares Outstanding (in million) 2021 200 40 80 50 In addition, you expect Lumos' current Net Working Capital of $50 million to increase to $54 million in 2021 and to $60 million in 2022. Finally, Lumos expects to make new capital expenditures of 15% of Operating Revenue in each of 2021 and 2022. Equity Beta (BE) Debt (D, in $million) Debt Beta (BD) To do the valuation, you have gathered data on comparable fiber-optic companies that are publicly traded, Ciena Corporation (CIEN) and Lumentum (LITE). 2022 220 45 80 55 CIEN LITE 625 525 $50 $98 153 75 1.00 0.96 1,350 0 0.20 Altice USA Inc. (ATUS) is a publicly-traded cable television provider headquartered in New York City. Currently, Altice's market capitalization is $20 billion and its debt is $26 billion. Its equity beta is 1.10, and its debt is rated BB- with a beta of 0.17. Lumos Networks is a privately-held fiber-optic telecommunications provider based in Charlotte, North Carolina. Altice is contemplating the possibility of acquiring Lumos as a way to get into the fiber-optic business, which is currently missing from its line of products. You have been hired to advise Altice's CEO, Dexter Goei, about the value of Lumos. For this purpose, you have produced the following projections for Lumos over the next two years. [Assume that time 0 (today) is 2020, time 1 is 2021, etc., and that all figures are in $million.] Operating Revenue System Operating Expenses Selling, General & Administrative (SG&A) Depreciation 2020 EBIT in 2020 (in $million) Price per Share Shares Outstanding (in million) 2021 200 40 80 50 In addition, you expect Lumos' current Net Working Capital of $50 million to increase to $54 million in 2021 and to $60 million in 2022. Finally, Lumos expects to make new capital expenditures of 15% of Operating Revenue in each of 2021 and 2022. Equity Beta (BE) Debt (D, in $million) Debt Beta (BD) To do the valuation, you have gathered data on comparable fiber-optic companies that are publicly traded, Ciena Corporation (CIEN) and Lumentum (LITE). 2022 220 45 80 55 CIEN LITE 625 525 $50 $98 153 75 1.00 0.96 1,350 0 0.20
Expert Answer:
Answer rating: 100% (QA)
a To calculate the proper discount rate for Lumos we can use the following formula rE r Erm rf where rE is the cost of equity r is the riskfree rate E is the equity beta and rm rf is the market risk p... View the full answer
Related Book For
Statistics For Business And Economics
ISBN: 9780321826237
12th Edition
Authors: James T. McClave, P. George Benson, Terry T Sincich
Posted Date:
Students also viewed these accounting questions
-
As a recent graduate, you have been hired by Canadian Communications Inc. (CCI), a large industry leader in the Canadian telecommunications market. CCI is contemplating investing in an upgraded...
-
This is a comprehensive project evaluation problem bringing together much of what you have learned in this and previous chapters. Suppose you have been hired as a financial consultant to Defense...
-
a). Voting Structure : If it is a publicly traded firm, look at whether the firm has multiple classes of shares and if so, whether they have different voting rights. If the government is an investor,...
-
Evan participates in an HSA carrying family coverage for himself, his spouse, and two children. In 2018, Evan has $100 per month deducted from his paycheck and contributed to the HSA. In addition,...
-
A 2000-kg automobile starts from rest at point A on a 6 o incline and coasts through a distance of 150 m to point B. The brakes are then fully applied, causing the automobile to skid to a stop at...
-
Russell Freightway provides freight service. The companys balance sheet includes Land, Buildings, and Motor-Carrier Equipment. Russell uses a separate accumulated depreciation account for each...
-
Under what circumstances can the return on sales be used to assess the profitability of a company? Can this ratio be used to compare the profitability of companies from different industries? Explain.
-
For the coming year, Bernardino Company anticipates a unit selling price of $85, a unit variable cost of $15, and fixed costs of $420,000. Instruction 1. Compute the anticipated break-even sales...
-
A company intends to invest 4 million into a project which would yield 12, 14, 16 percent during 3 years respectively. the company would also recover original investment after 3 years. the company...
-
Funtime, Inc., manufactures video game machines. Market saturation and technological innovations caused pricing pressures that resulted in declining profits. To stem the slide in profits until new...
-
st C (Ch 9 10) - Sp24 FIN 390 X M Question 8 - Test C (Ch 9 10) - C X M Sign In | Connect | McGraw Hill x | + C...
-
Analyse the market/industry by using key statistics like size and growth of the market. Include at least two key external trends (at least one opportunity and at least one challenge) which may have...
-
3. You are driving your car at 12 m/s when a deer jumps in front of your car. What is the shortest stopping distance for your car if your reaction time is 0.80 s and your car brakes at 6.0 m/s? 4. A...
-
Handy Home sells windows ( 6 0 % of sales ) and doors ( 4 0 % of sales ) . The selling price of each window is $ 4 0 0 and of each door is $ 9 0 0 . The variable cost of each window is $ 2 2 5 and of...
-
Kohl Company provides warranties for many of its products. The January 1 , 2 0 2 2 , balance of the Estimated Warranty Liability account was $ 2 5 , 1 0 0 . Based on an analysis of warranty claims...
-
Consider the given partial LINDO Code: MAX 50 BR+ 20 IC + 30 COLA + 80 PC s.t. 40 BR+ 20 IC + 15 COLA + 50 PC
-
assume Noah wants to earn a return of 1 5 . 7 5 % and is offered the opportunity to purchase a $ 1 , 0 0 0 par value bond that pays a 1 3 . 5 0 % coupon rate ( distributed semiannually ) with three...
-
(a) Use integration by parts to show that (b) If f and g are inverse functions and f' is continuous, prove that (c) In the case where f and t are positive functions and b > a > 0, draw a diagram to...
-
To determine whether extra personnel are needed for the day, the owners of a water adventure park would like to find a model that would allow them to predict the day's attendance each morning before...
-
A medium-sized automobile insurance company is interested in developing a regression model to help predict the monthly collision claims of its policyholders. A company analyst has proposed modeling...
-
According to an AdweekJ Harris (July 2011) poll of U.S. adults, about 45% work during their summer vacation. Assume that the true proportion of all U.S. adults that work during summer vacation is p =...
-
When preparing interim financial statements, why is it that the balance sheet accounts are not restated to correspond to the time period being covered?
-
Is the cost of merchandise acquired during the period classified as an asset or an expense? Explain.
-
Assume that a company has in its inventory units of a particular product that were purchased at several different perunit costs. When some of these units are sold, explain how the cost of goods sold...
Study smarter with the SolutionInn App