Read the case and develope report by buidling excel and answering questions.
– While the write-up should briefly identify the key issues in the case, discuss your analysis of the problem including risk factors and provide a recommended course of action/solution, the focus of this analysis should be on the valuation.
– The report should be broken down into sections, each with its own heading. Start with an Executive Summary of your recommendation. Then provide the case problem in the next section. I would recommend that you have a section called Case Context next that lays out the reason behind the Case Problem being studied. This section is where you describe the strategic context of the case. After having laid out the strategic context for the case, move to a detailed Case Analysis of the situation, including risk assessment of the transaction, if appropriate. You end with your recommended solution. Do not structure the report as responses to the suggested questions. With only 4 pages for analysis, do not waste space summarizing the history of the company. Length may not exceed 4 double-spaced (12 point) typed pages plus exhibits. You may attach as much information as you like in the Appendix
To provide some guidance for your analysis, the following study questions are offered.
Developing answers to these questions does not exhaust the productive analysis that can be
undertaken with respect to this case.
1. Why does Warren Buffett want to buy MEG’s newspaper division?
2. Is MEG’s newspaper division worth $142 million?
a. Start by valuing the newspaper division, assuming the cash flow forecast in Exhibit10 is
reasonable. For the purposes of this analysis, assume a market risk premium of 6%, a debt
beta of 0.20, a closing date for the transaction of January 1, 2012 (you can ignore half-year
discounting) and a reduction of $30 million in your valuation of the entire newspaper
division to reflect the fact that the Tampa Tribune is excluded from the purchase agreement.
b. Are the cash flow forecasts reasonable? What are the critical assumptions you need to make
for the newspaper division (again, less The Tampa Tribune) to be worth $142 million? To
be worth more than $142 million?
3. As a current lender to MEG, would you refinance the $225 million term loan that is coming
due? Would you refinance the term loan as a new lender?
4. What should MEG’s CEO Marshall Morton do? What are his options?
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