Tenet Healthcare (THC) Harvard Case Solution & Analysis

Valuation Methodologies:

The Valuation Methodologies are used in the analysis of the Tenet Healthcare are income and market, which is already discussed in the financial Analysis headings. Now the enterprise valued its strategies with new dimensions which give a competitive edge to the organization. The further most discussion is done in the different headings of assumptions, discounted cash flow and multiples analysis.

Assumptions Used

The assumption is used in the analysis of the discounted cash flows and multiple is same as mentioned in above some of the headings. One assumption was left, which is the stock market price is taken on the average values of the quarterly prices of the shares, this analysis is very important in this case of the solution.

Discounted Cash Flow

Discounted cash flow is calculated on the evaluation of attractiveness of the investment in the hospital healthcare companies.  In the year zero the present value of the firms as with the extraction in the annual reports is $ 4404 which is shown in the excel file name as DCF.  The tax rate 27%, which handles the profit with the addition of non-cash items. The data is showing the result of 2012 to 2008. The CAPEX is assumed that the investing Activities differ. Moreover the working capital requirement is extracted out in the balance sheet of the annual report 2013. Non-cash items are Depreciation and Amortization, Impairments cost and Gain/loss on the consideration of the assets. The terminal value is calculated on the return back of the working capital. After all the analysis with curtailing all the debts the enterprise has value of $404 million and 1.09 per share value.  The WACC is calculated 7% on the basis of the assumption and historical trend analysis, which depicting the weight of equity is 20% and debts 80% on average.


Multiple analyses are done with respect to the market approach which is concerned with stock market price. The current price of stock $58 which is showing on the google and take and average from annual report which is $22.7 market share price. The valuation is utilized to compare the market value of a firm relative to key statics that are assumed to relate to that value. The multiple is simply clarified as “If corporation price multiple is lower than the price multiple of standard, then company stock is relatively underestimated. Otherwise, if corporation price multiple is larger than the price multiple of standard, then enterprise shares are relatively overestimated”

Commentary on value of stock

The common share value with the accordance of the annual reports, there are two ends, one is high ends and second is low ends. The price of the quarters is calculated in the report, which is mentioned in the excel file as $21.28, $19.94, $21.5 and $28.36 respectively. This average is analysis through the addition of high and low ends divide by two or each quarter. It shows that the price of the stock is fluctuating according to the changes in the circumstances. The changes are not adversely but they have some similarity level, which infect is good.


For the Tenet Healthcare organization it is conclude that it reflects a better potential in finance and management sides. The investors are very much attracted towards their performance in terms of returns as well as in the future investment decision. There are certain strengths that made THC a way out to the organizational success. Apart from the strengths there is a problem in maintaining gearing ratio for a particular capital structure. The huge debts would cause to increase the cost of capital and results in creating chances of liquidity risks however it should devise certain strategies to counter such problems...............................

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