Answer Happy

2. ABC FBO is looking to buy a flight school. It is being offered an established school whose owner wants to sell. ABC's CFO gave you the school's numbers and asked you to calculate its price. The CFO asks that you use a 4.5% discount rate and a 2% growth rate for year 6 and on. What should ABC consider paying for the flight school?

B с H K D E TED Flight School Yrs. 1.5 419 Cash Flows (in '000 S) TV 619 Sales 404.3 1 2 3 Revenue growth 4 Costs (% of revenue): 5 Wages and benefits 6 Aircraft and fuel costs 7 General and administrative 8 Rates: 9 Tax 10 Discount 11 12 Results 13 PV of NCF (incl. TV) 14 + Cash 15 - Debt 16 Value of equity 17 18 21.09 4.596 Wages and benefits Aircraft and fuel costs General and administrative Net Income before Tax Taxes Net Income after Tax Cash flow adjustments: Working Capital Capital Expenditures Net Cash Flows 4.7 0.6 (0.3) (11.5 (0.3) (116) (0.3) (117) (0.3) (118) (0.3) (2.0) 000