Restructuring Navigator Gas Transport Plc. Harvard Case Solution & Analysis

For the purpose of appraising the proposed project with the help of net present value, we have to analyze the proper discounted rate, in order to discount the cash flows to arrive at NPV. For calculating Weighted Average Cost of Capital, we have made some assumptions and calculated the cost of equity by using Capital Asset Pricing Model approach. The cost of equity was calculated by assuming beta as 1.5 and market rate of return as 3%, and came up the value of 8.45% as cost of equity.

This cost of equity was then used in the formula of WACC, which was then led to the value of 6.35%. This discounted rate was then used in estimating the net present value of the proposed project. The NPV was positive $61.591 million, which shows the strong financial viability of the proposed project.

Comparative Analysis

We have been provided with the industry comparable analysis with the information of some of the competitors. After analyzing the data given in the case, we have analyzed the strengths of the Navigator Gas Transport PLC. against the averaged values of the competitors. The comparable industry average of revenues was $313.70 million and the revenues of the Navigator Gas Transport PLC. was just $26.8 million, which was very low as compared to the industry averaged.

The comparable industry average of EBITA was $74.28 million and the EBIT of the Navigator Gas Transport PLC. was just $15.2 million, which was very low as compared to the industry averaged. However, the comparable industry average of net interest expense was $15.9 million and the net interest expense of the Navigator Gas Transport PLC. was around $2.3 million, which was a good in terms of less expenses and increased profitability.

The comparable industry average of market value, to equity was $148.33million and the market value of equity of the Navigator Gas Transport PLC. was $157.2 million, which was just greater than the industry averaged. Similarly, the comparable industry average of debt was $404.18 million and the debt of the Navigator Gas Transport PLC. was just $37.5 million, which was very low as compared to the industry averaged.

Conclusion

Based on our analysis, judgment and reasonable assumptions, we would like to suggest that, although the comparisons against the industry averaged data were not so satisfactory, but still the proposed restructuring plan should be given a green signal, as the NPV is positive $61.591 million, which shows the strong financial viability of the proposed project, subject to the most accurate estimations and analysis...............................................

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