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第六組 : 黃豪平 101355005, 八木澤將志 101355071 鄭瑜 101355074, 陳貞妮 102363105, 施智明 102363110, 王未來 102363123

第六組 : 黃豪平 101355005, 八木澤將志 101355071 鄭瑜 101355074, 陳貞妮 102363105, 施智明 102363110, 王未來 102363123. Started by David Neeleman in 1999 Focused on point-to-point service to large metropolitan areas

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第六組 : 黃豪平 101355005, 八木澤將志 101355071 鄭瑜 101355074, 陳貞妮 102363105, 施智明 102363110, 王未來 102363123

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  1. 第六組: 黃豪平101355005, 八木澤將志101355071 鄭瑜101355074, 陳貞妮102363105, 施智明102363110, 王未來102363123

  2. Started by David Neeleman in 1999 • Focused on point-to-point service to large metropolitan areas • It’s operating strategy produced the lowest cost per available-seat-mile of any major US airline in 2001 (6.98 cent versus the industry average of 10.08 cent) • Uses only one model of aircraft – A320 • More reliable, fuel-efficient, and greater economics of scale Company Background

  3. JetBlue wanted to raise additional capital through a public equity offering. • The initial price range for JetBlue shares was $22 to $24. • But facing excess demand for the 5.5 million shares planned for the IPO, management had filed an increase in the offering’s price range to $25 to $26. • However, most of the group thought the stock faced “blow-out” demand. Our Goal: Decide what IPO price JetBlue should set. Situation

  4. Pros and Cons of Going IPO

  5. Multiple Comparable Approaches

  6. Data samples Profitable & Low-cost career airlines • AirTran • Frontier • Ryanair • Southwest • West Jet PE Multiple

  7. *53,000,000 (NOPAT in 2002) / (35,100,000 (Number of Shares in 2001) + 5,500,000 (Shares Planning to Offer in this case)) = 1.31 (EPS in 2002) *We took NOPAT from Exhibit 13 and the number of share from the bottom of Page.7, although EPS is not actually calculated by NOPAT but there is no information about profit in 2002 *The average of JetBlue’s share price is $33.02 PE Multiple

  8. Data samples Profitable & Low-cost career airlines • AirTran • Frontier • Ryanair • Southwest • West Jet Total Capital

  9. *-32,167,000 (Equity) / 35,100,000 (Number of Shares in 2001) = -0.92 (Book Equity per Share) *(28,781,000 (Short-term borrowings) + 54,985,000 (Current maturities of long-term debt) + 290,665,000 (Long Term Debt)) / 35,100,000 (Number of Shares in 2001) = 10.67 (Book Debt per Share) Total Capital

  10. EBIT Multiple Approach

  11. Total debt is 374,432,000 in 2001 EBIT Multiple Approach

  12. Total debt is 374,432,000 in 2001 EBIT Multiple Approach

  13. Assumptions before calculation • The risk-free rate and market premium are as of April 2002. • We take the long-term treasuries rate as risk free rate, that is 5%. • Corporate income tax rate remains flat at the 2002 level of 38.5% (Exhibit 5). • A terminal growth rate of 4.5 percent, which is a reasonable estimate of GDP growth, base on official estimates. Discounted Cash Flow/ WACC

  14. Cost of Debt

  15. CAPM= 5.0%+1.1* 5.0%= 10.5% Cost of Equity:CAPM

  16. WACC • = Wd* Cd* (1- Tax Rate)+ We* Ce • = 0.1028* 0.0691*( 1- 0.385)+ 0.8972* 0.105 • = 9.86% the Weights and WACC

  17. Discounted Cash Flow

  18. Price per Share

  19. Average IPO Price: $28.82 • Benefits of IPO Underpricing: • Attract investors • Ensure successful sale • Over the last 50 years, IPO’s in the United States have been underpriced by 16.8 percent on average. • IPO we’ve decided to set: $23.98 (VS $27 actual IPO, 5.8 million shares issued) Conclusion

  20. Current Stock Price of JBLU

  21. Thank you for listening!

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