Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )

24 trade,wecanestimateanexpectedenterprisevalueinyear
5.

Wecanestimatethepresentvalueofthisestimatedvalueby
discounting back at Global Crossing’s cost of capital.

This, of course, is based on the assumption that Global
Crossingwillbecomeahealthyfirm.Usingtheprobabilityof
survival(23.37%)anddistress(76.63%)estimatedearlier,we
can value Global Crossing’s operating assets today:

Note thatthe estimateof thedistresssalevalue of $2,180
millionwasmadeearlierinIllustration17.2.Addingbackthe
cashbalanceofthefirm($2,260million)andsubtractingdebt
($4,923 million) yields a value for the equity:

Enterprise value $2,879 million

+ Cash and marketable securities$2,260 million

− Debt $4,923 million

Value of equity $ 216 million

Value per share = $216/886.47 $ 0.24

FROM FIRM TO EQUITY VALUE IN DISTRESSED
FIRMS