Case ID: 288022
Solution ID: 22830
Words: 1466
Price $ 75

Tiffany & Co

Case Solution

This premier retail jewelry company was bought from its parent, Avon, by a group of investors led by its own management in 1984. The company was highly leveraged, financially, and had to scramble to meet the cash flow and earnings requirements laid down by its lenders. Management effected a turnaround and decided to go public to pay down its debt and provide further growth funds. Students must assess the company's relative appeal to investors and refine a pricing recommendation for the securities 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?