END-OF-COURSE CASENEWGRADE ENERGY INC.Blair Swystun, the Senior Vice-President and Chief Financial Officer of Crown Investments Corporation of Saskatchewan (CIC), was faced with a challenging decision. CIC was contemplating the sale of its fifty percent (50%) interest in a heavy oil upgrader, NewGrade Energy Inc. (NewGrade), and wanted an assessment of the worth of the company. To obtain a reasonable estimate, Swystun has instructed an independent adviser with expertise in the industry to provide input. In addition to receiving an estimate of value, Swystun also needed to formulate a strategy for selling off the company.The learning objectives include:? How to value a company utilizing the free cash flow method, the comparables method and the precedent transactions method? Strategies for arranging a strategic saleBased on your analysis, please answer the following questions. The quality of the case analyses should be based on the originality and rigor of the answers provided for the questions related to the case and the thoroughness of the power point presentation documents. The groupss also need to do adequate outside research to complement their findings and analyses.1. Describe the various constraints of the valuation faced by NewGrade.2. Describe the calculation underlying the Free Cash Flow to the Firm Method utilizinga. The Value of the Firm using Free Cash Flowb. The Cash Flow Forecastc. The Capital Structured. The Cost of Capitali. The Capital asset Pricing Modelii. Beta of Comparable Companiesiii. Adjusting the Beta for Leverageiv. Cost of Equityv. Adjusting for an Illiquidity Premiumvi. The Cost of Debtvii. Weighted Average Cost of Capitale. Valuation Using Discounted Cash FlowDescribe the Valuation using Comparables MethodDescribe the Valuation using Precedent Transactions MethodAs the adviser to Swystun, assess the value of CIC’s equity interest in NewGrade by employing the free cash flow method with no debt, free cash flow method with 25% debt, the comparables method and the precedent transactions method.What is the average valuation of NewGrade?Which strategy should Swystun employ in selling the company?
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