Rocky Mountain Regional Airlines Case

Rocky Mountain Regional Airlines Case

The Rocky Mountain Regional Airlines case will be analyzed and discussed during session #13.  This is a fairly simple and direct valuation case, and we’ll get through it all in one day.

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Your task when analyzing this case is to estimate the value of Rocky as of the date of the case – early January of 2018 (pre-COVID).  You must estimate the value of Rocky using two methods:

  1. Valuation by multiples using comparable firms, and
  2. Discounted cash flow (DCF) valuation.

You are given the story line and data for Rocky, and you’re also given data for comparable airlines in Exhibit 2, so you have everything you need to estimate Rocky’s valuation by multiples.  Remember this method requires you to recognize and use true comparables, and identifying true comparables is always the challenge when using this valuation method.  And be robust here, identify and use several multiples, one multiple isn’t sufficient.

You also have the story line and data necessary to estimate Rocky’s value using your DCF tools.  I want you to first calculate the value of the entire firm (the enterprise value) based on the company’s free cash flow to all investors, and then subtract the interest-bearing debt owed to lenders to determine the value of Rocky’s owners’ equity.  During our valuation basics class on October 5th we worked through both valuation methods, so you have the tools necessary to estimate Rocky’s enterprise value and value of equity.

Your case analysis must be turned in at the start of class on October 7th.  Your delivered analysis must include your spreadsheets which show your valuation calculations, and your case write-up should discuss your analysis and the valuation which resulted from your analysis.  Two pages of text – single spaced and size 12 font – is the maximum allowed in your write-up.

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