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    West Teleservice: Case Questions

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    West Teleservice: Case Questions

    Uploaded by

    Alejandro García Acosta
    267 views1 page
    west teleservice

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    5159918

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    west teleservice

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    267 views1 page

    West Teleservice: Case Questions

    Uploaded by

    Alejandro García Acosta
    west teleservice

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Strategic Financial Management Professor Mitchell Petersen

    West Teleservice: Case Questions


    This case examines valuation in a context where there is limited information. When
    valuing the equity of a firm that is not public and which may have limited operating history, you
    will be forced to make and defend your assumptions. The fact that the industry is new or influx
    will complicate the valuation procedure, although in theory it doesn't change the basic method.
    West Teleservices is a private company that is planning its first issue of public equity (its initial
    public offering) for the end of November. They intend to sell 5.7 million new shares of stock to
    the public.

    1) Industrial Landscape. The value of a business depends upon a firm's strategy and the
    viability of their strategy. What facts about the telemarketing industry, especially the
    outsourced portion, are relevant for your valuation of West Teleseivice? How does West
    Teleservice's strategy compare to the strategy of its competitors? Is this relevant for your
    valuation of West Teleseivice?

    2) Multiples Value of West Teleservice. What price should Ms. Little recommend to West
    Teleservice's management? Use a multiples approach to value West Teleseivice. Explain
    your multiples valuation thoroughly. You should consider when a multiples approach to
    valuation makes sense. Think about why bankers use this approach to value firms.

    3) Changes in Multiples Valuations. Why did the multiples change over time in this
    industry? Do these changes make sense?

    4) Discounted Cash Flow Value of West Teleservice. Using a discounted cash flow
    approach, calculate the correct value for West Teleseivices Inc. as of the end of 1996.
    Use a discount rate of 13.5 percent and a risk free rate of 5.5 percent. Assume the firm
    will grow at 6 percent after 2001. You will need to make additional assumptions. You
    will need to consider and discuss the size of the industry, the trends that are driving the
    industry, the current value of the other teleseivice firms, and the sources of these values
    (e.g. competitive advantages). Remember, valuations are the market's view of the future
    cash flows that these assets will generate. Based on this information, what price should
    Ms. Little recommend to West Teleseivice's management as the price at which West
    Teleservice should go public?
    If your multiples valuation is not the same as your DCF valuation, you should
    consider why the two numbers do not match.

    Copyright © 2021, Mitchell A. Petersen

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