Valuing Rajat Bhatia’s Business Plan
(5 pages of text)
A final-year student at a business school estimated the net present value (NPV) of his proposed business plan — a tourism and transport business in India — using three different methods and encountered different valuation results. He approached the professor who had taught him valuation concepts in a finance course and wanted to know the reasons for the difference.
This case is designed for an MBA-level course in corporate finance. It is intended to provide students with a background to create the following statements and analysis:
- Estimation of cash flow using Free Cash Flow to Firm, Free Cash Flow to Equity, and Capital Cash Flow.
- Measurement of cost of capital.
- Valuation of a project.
- Mismatch of valuation estimates.
The case provides an opportunity to compare and review some of the popular cash flow valuation techniques.
Nagpur City, India, 2011
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