STUDENT analysis

Title Page

This spreadsheet supports STUDENT analysis of the case “JetBlue Airways IPO Valuation” (Case 45).
This spreadsheet was prepared by Professor Michael Schill. Copyright © 2004 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. For customer service inquiries, send an e-mail tosales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.
Rev. Jan. 20, 2011

Model Facts

JetBlue TN v3.0
This spreadsheet supports STUDENT analysis of the case, “JetBlue Airways IPO Valuation” (UVA -F- 1415)
Revised, February 2007
Copyright (C) 2004, by the University of Virginia Darden School Foundation.

DCF

Exhibit 13
JETBLUE AIRWAYS IPO VALUATION
JetBlue Financial Forecast
$ figures in millions Actual Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Number of aircraft 21 34 48 62 74 86 98 108 113 117
$ Revenue/plane $15.3 $17.6 $18.4 $19.2 $20.1 $21.0 $21.9 $22.8 $23.8 $24.9
Expected inflation 16% 4% 4% 4% 4% 4% 4% 4% 4%
Operating margin 8.4% 13.3% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2% 15.2%
$ Depreciation/plane $0.5 $0.5 $0.5 $0.6 $0.6 $0.6 $0.7 $0.7 $0.7 $0.8
$ CapEx/New planes $21.3 $22.3 $23.5 $24.6 $25.9 $27.1 $28.5 $29.9 $31.4 $33.0
Expected inflation 5% 5% 5% 5% 5% 5% 5% 5% 5%
NWC Turnover 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4
Revenue $320 $600 $884 $1,192 $1,485 $1,802 $2,144 $2,466 $2,694 $2,912
Cash expenses 283 502 723 975 1,215 1,474 1,753 2,016 2,202 2,380
Depreciation 10 18 26 36 45 54 65 75 83 90
EBIT 27 80 134 181 226 274 326 375 410 443
Tax 34% 9 27 46 62 77 93 111 127 139 151
NOPAT 18 53 89 120 149 181 215 247 270 292
Capital expenditure 234 290 328 345 310 326 342 299 157 132
Net working capital 34 63 94 126 157 191 227 261 285 308
Fixed assets 530 802 1,104 1,413 1,679 1,950 2,227 2,451 2,526 2,568
Change in net working capital 29.557 30.076 32.599 31.039 33.526 36.172 34.152 24.102 23.083
FCF (249.58) (243.50) (222.19) (147.71) (124.10) (98.05) (10.66) 171.85 227.11 4403.7903098882
DCF -227.1189464669 -201.6444583011 -167.4369763218 -101.2962961843 -77.448411784 -55.6839624642 -5.5096463969 80.8179430638 97.1948569405 1884.6406954022
NPV 1226.5147974874
Less: preferred stock -210.44
Less: long term debt -301.373
add: cash 117.522
equity value 832.2237974874
shares 40.6
WACC 9.89%
Price 20.4981230908

WACC

southwest capital structure
market value of debt 1,842 ex 5
shares outstanding 776.8 ex5
stck price 20.69 ex5
market value of equity 16,071.99
financing total 17,914
SW D/E ratio 0.11
Jetblue Beta
SW levered beta 1.1 ex5
SW unlevered beta 1.02
SW tax rate 31% ex5
Jetblue tax rate 34% ex13
Jetblue D/E ratio 0.31 estimated using median total capital ex6
Jetblue levered beta 1.24
Jetblue cost of capital
pretax cost of debt 6.91% YTM of SW 5yr debunture
tax rate 34% ex13
after tax cost of debt Kd 4.56%
Dividend preferred stock 16,970,000 ex3
convertible preferred stock 210,441,000 ex2
cost of preferred stock Kp 8.1%
Equity beta 1.24
Risk free rate Rf 5% current long term u.s treasury, Pg 623 text
market risk premium Rm-Rf 5% market risk premium, Pg 623 text
cost of equity Ke 10.5%
Weight of debt Wd 10.28%
weight of preferred stock Wp 8%
weight of equity We 89.7%
WACC 9.89%

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