mbak finance

ASP for Finance Module: Session 4 Deliverables

1. Please answer all the questions in this document.

2. Please attach (upload) the write up in PDF and attach Excel file showing your analysis.

Assignment

1. Does the company pay dividends? What is the dividend policy of your company? If you have a dividend history, value the price of stock using Dividend Valuation Model

a. Explain the Dividend Valuation Model

b. Assume UNEVEN growth rates model

i. What are your growth rate assumptions? Why?

ii. Long term growth rate should not be more than 5%.

c. Cost of equity can be measured by

i. CAPM

d. How does this model work for your company?

e. If you company does not have dividends you won’t be able to do Dividend valuation.

2. Valuation Using FCF Method

a. Calculate, forecast FCFs : you can assume uneven or custom growth rate in FCF (template)

b. Assume a reasonable long term g, less than 3%

c. Discount all your FCFs and Terminal Value @ WACC using NPV function

· Terminal value is estimated by multiplying EBITDA 5 years from now and multiplying it by EBITDA multiple.

d. Add CASH

e. Subtract all your debt

f. This gives you the market value of all equity (implied)

g. Divide by # of shares and get value of equity per share

h. How does this compare with the current stock price?

3. Valuation using Comparables

a. Look at EBITDA multiple for at least 3 comparable companies.

b. How do the compare to your company’s EBITDA multiple?

c. EBITDA to Total Enterprise value

d. So if you multiply YOUR COMPANY EBITDA by the multiple (peer benchmark), what does that show about the Total Enterprise Value of YOUR COMPANY?

e. Then TEV – Total Liabilities + Cash = Equity Value

f. Divide Equity Value by # of Shares = implied equity value per share

4. Compare the results of all the valuations and provide a write up.

a. Discuss and analyze your findings, your assumptions, and also provide a sensitivity analysis , meaning how your results might change if you reasonably varied your assumptions.

b. Your findings should show your estimation of the equity value of your company, as a total market value of equity and/or as a market value of stock per share.

c. What is your view of the result of your analysis? Is your company fair, over, or under-valued?

d. Remember, you will be putting all your assignments together into a single document, including appendix and references. Your numbers will need justifications and references.

5. For each book, prepare a 15 minute presentation as a group

a. Basic outline, content

b. Comments (what you liked, didn’t like, recommendations to potential readers)