Tiffany & Co Case Solution

Case Solution

This premier retail jewelry company was bought from the parent, Avon, by a number of traders introduced by a unique management in 1984. The business was highly utilized, financially, and required to scramble to fulfill the cash flow and earnings needs laid lower by its loan providers. Management effected a turnaround and made a decision to go to public to cover lower its debt and offer further growth funds. Students must appraise the company's relative attract traders and refine a prices recommendation for your opportunities underwriting syndicate.

Excel Calculations

Value of the Firm and Equity

Income Statement Data

Balance Sheet Data

FREE CASH FLOW

Intrinsic Equity Value - In Thousands

Intrinsic Debt Value

UNLEVERED FREE CASH FLOW

uFCFF

Present Value

Value of The Firm

Firm value using Comparables

P/B ratio

Book value Per Share

Price

Value Of the Equity

Value Of the Debt

Value of the Firm

Average Value Of the Firm

Worth more tha uFCFF

Questions Covered

1. What is the Intrinsic Firm Value of Tiffany? What is the Intrinsic Equity Value of Tiffany?

2. Why do customers buy from Tiffany? Is the “need or desire” different for an engagement ring from Tiffany’s in New York than for a sterling silver bookmark bought from a catalogue as a corporate “give away?” How do your answers to these questions impact the comparables you choose to estimate a PE ratio?

3. Why are the investment bankers so focused on comparable data? You are Chaney. Should this concern you?

4. What is the “Tiffany franchise” worth, over and above the uFCFF?

5. At what price per share should Tiffany take its equity public?

6. Calculate how much is Tifanny worth using the comparables? Which one would you use and why?