3. Conduct a valuation analysis by completing the following steps:
a. What is Lady M’s enterprise value? How much equity stake should be given up to the Chinese investor? How does valuation and % equity stake change
under the two different approaches (growing perpetuity and EBITDA multiple) to determine terminal value?
b. Are the baseline assumptions made by the owners realistic? Especially for WACC and capital expenditures, are they too low? Note that just answering low
or high is not enough. Use supportive evidence/analysis to justify your arguments. For instance, you may compare to a peer company or the industry average
(the method of comparables).
c. Sensitivity analysis: use different values of WACC and CAPEX ratio (e.g., at values you believe are more appropriate for Lady M), repeat 3(a). Note that for
CAPEX sensitivity analysis, you will need to redo the proforma and then use the new set of free cash flows to redo valuation. In presentation or the case
report, you may want to present the sensitivity analysis outcomes in a summary table for each different scenario.