1. 1 Master in Economics and Finance Case study The market value of a car company: “Auto sport” Venezia, January 2009

2. 2 Suppose: 1.Today is December 31 st 2001; 2. A famous car company (XX) has to manage a financial distress. That’s why it would like to list a controlled company, in order to sell 35% of its shares; 3. Company (XX) shows you, a well known financial analyst, the business plan of the controlled company, asking for a valuation.

3. 3 “Auto-Sport” – past and future evolution EBITDA/EBIT/FCFO (EuroBn.) Expected Sales (Euro Bn.) Growing sales and profit; Positive FCFO from 2004 IMA (02-05) 5,2% 6,8% 8,2%

4. 4 Sales volume “Auto-Sport” Strong volume increase for brand 2 Brand 2 Brand 1 Average price per unit sold (‘000 Euro) Brand 1 Brand 2 155,9 186,6 62,165,4 6.042 6.158 8.027 11.765 15.503 16.624

5. 5 Pay attention!!! - There is a big difference between the average price per unit sold of the two brands

6. 6 Total sales (Euro Mln.) Brand 1 Brand 2 54% 46%

7. 7 Expected operating cash flows (FCFO)

8. 8 Summary of Cars Segmentation and exposure to cyclicality Wealth Ultra-HNWI High Income/ Wealth HNWI High Income....... Consumer Confidence HNWIU-HNWILow  Cars seen as investment/enjoyment  Relies on accumulated wealth  Portfolio diversified resistant to market swings  Cars are well within purchasing capability  Influenced by equity markets  High Incomes to cover monthly payments  Mature industry closely related to business cycle Cyclicality decreases with increases in car value Cyclicality/ Volatility High PIL UHNWI HNWI Shipments Driver % ChangeWW Shipments WW Shipments Number o HNWI WW Shipmentsd Number o U HNWI

9. 9 In order to use a DCF approach: - how do you calculate the “fair” cost of capital? And then: - which is the fair value of the company?