...Capital Valuation Paper YOUR NAME COURSE Instructor NAME DATE Capital Valuation Paper A business valuation of a company, especially one the size of Target, is a mystery but is often an integral part of planning, decision-making, strategic assessment, and maybe an equitable resolution to a touchy concern. Knowing what a business is worth and placing a value on it builds confidence so undervalue or overvalue of the business does not happen. Team C will perform a capital valuation of the retail merchandising chain Target. To obtain the answers needed for the valuation, Team C will justify the current market of Target’s debt and equity by using various capital models of valuation. Team C will provide in-depth calculation of the discoveries and include models with rates of return. Current Market Price of Target’s Debt Valuation models are used in investment decisions whether it is a decision on which assets are under or overvalued. When in an efficient market, the market price is the best estimate of value. The purpose of the Discounted Cash Flow valuation model is the justification of the value. In the discounted cash flow valuation, the value of an asset is the present value of the expected cash flows on the asset. The information needed to use the discount cash flow valuation is: estimate of the life of the asset, estimate the cash flows during the life of the asset, and estimate the discount rate applied to these cash flows to obtain a...
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...Cisco’s current assets as of Apri1 27, 2013 sits at $61.417.000 and Cisco’s current liabilities sits at $21,063.00 which makes the marketing capital $40,354,000. For the past 3 years Cisco’s assets has been on the up rise which shows that the company is has great potential and intellect. The ratio for current assets and current liabilities is 2.91 considering the economical state of the United States these numbers are pretty good. Working capital gives investors an idea of the company's underlying operational efficiency. Money that is tied up in inventory or money that customers still owe to the company cannot be used to pay off any of the company's obligations. |CSCO Working Capital Ratio |(April 30, 2013) |(Jan. 25, 2013) |(Oct. 26, 2012) |(July 27. 2012) |(April 30, 2012) | | |III. Quarter |II. Quarter |I. Quarter |IV. Quarter |III. Quarter | |Y / Y Current Liabilities Change |23 % |2 % |-1.99 % |1.29 % |6.29 % | Overall Ranking |# 81 |# 53 |# 53 |# 51 |# 46 | |Seq. Current Liabilities Change |17.34 % |4.88 % |-3.48 % |3.54 % |-2.69 % | |Seq. Current Assets Change |1.14 % |4.87 % |-6.5 % |1.18 % |3.23 % | |Cisco Systems Inc is currently traded for 24.27. This company has historical hype elasticity of 0...
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...University of Pennsylvania ScholarlyCommons Wharton Research Scholars Journal 5-1-2006 Valuation of Venture Capital Securities: An Options Based Approach A. Lloyd Thomas University of Pennsylvania This paper is posted at ScholarlyCommons. http://repository.upenn.edu/wharton_research_scholars/36 For more information, please contact repository@pobox.upenn.edu. Wharton School Valuation of Venture Capital Securities: An Options Based Approach Disciplines Business | Finance and Financial Management This journal article is available at ScholarlyCommons: http://repository.upenn.edu/wharton_research_scholars/36 Valuation of Venture Capital Securities 1 Valuation of Venture Capital Securities An Options Based Approach Wharton Research Scholars 2005-2006 Investigator: A. Lloyd Thomas Supervising Professor: Dr. Raffi Amit Copyright © A. Lloyd Thomas, 2006 Valuation of Venture Capital Securities 2 Table of Contents Table of Contents................................................................................................................ 2 Introduction......................................................................................................................... 3 Venture Capital Financing Negotiations......................................................................... 3 Venture Capital Securities .............................................................................................. 6 Common Stock...
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...zju.edu.cn/jzus E-mail: jzus@zju.edu.cn The Q theory of investment, the capital asset pricing model, and asset valuation: a synthesis MCDONALD John F. (College of Business Administration, University of Illinois at Chicago, Chicago, USA) E-mail: mcdonald@uic.edu Received Feb. 23, 2004; revision accepted Mar. 6, 2004 Abstract: The paper combines Tobin’s Q theory of real investment with the capital asset pricing model to produce a new and relatively simple procedure for the valuation of real assets using the income approach. Applications of the new method are provided. Key words: Investment theory, Asset pricing, Appraisal Document code: A CLC number: F832.48 INTRODUCTION This paper combines the economic theory of real investment and the standard financial model of asset pricing to produce a method for the valuation of real assets; and intentionally uses relatively simple versions of these two theories to link economics, finance, and appraisal. Numerical examples using data on real estate assets illustrate the valuation method. The Q theory of investment, introduced by James Tobin (1969), is popularly accepted theory of real investment hypothesized to be a positive function of Q, defined as the ratio of the market value to the replacement cost of capital. Standard presentation of the theory, such as that of Romer (1996), shows that Q is the value to the firm of an additional unit of capital, which is the discounted value of its future marginal revenue products. Extensions...
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...Information Paper ACKNOWLEDGEMNTS: The Publisher would like to express its thanks to Estates Gazette, the South Bank University and Jones Lang Wooten for permission to reproduce definitions taken from The Glossary of Property Terms (Estated Gazette, 1989). Please note: References to the masculine include, where appropriate, the feminine. Published by RICS Business Services Limited, a wholly owned subsidiary of The Royal Institution of Chartered Surveyors, under the RICS Books imprint Surveyor Court Westwood Business Park Coventry CV4 8JE UK No responsibility for loss occasioned to any person acting or refraining from action as a result of the material included in this publication can be accepted by the author or publisher. ISBN 0 85406 802 3 © RICS May 1997. Copyright in all or part of this publication rests with the RICS, and save by prior consent of the RICS, no part or parts shall be reproduced by any means electronic, mechanical, photocopying, recording or otherwise, now known or to be devised. Reprinted 2001 Printed by Quorn Litho Contents Information Papers Executive Summary Preface 1 1.1 1.2 1 .3 2 2.1 2.2 2.3 3 3.1 3.2 3.3 3.4 3.5 4 4.1 4.2 4.3 4.4 5 5.1 5.2 6 6.1 6.2 6.3 7 7.1 7.2 7.3 8 8.1 8.2 8.3 4 5 7 Valuation and Calculation of Worth A discussion of the role of the valuer and the distinction between valuation, appraisal and calculation of worth. Introduction Valuation and Calculation...
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...idle. Company The Dixon Corporation is a specialty chemicals company that supplies primarily to the paper and pulp industry. The company’s products are mainly used by paper companies as a bleaching agent for pulp. Dixon’s principal plant was located in Calhoun, Georgia, and mostly supplied paper and pulp companies in the southeastern United States. The company achieved strong growth with a compounded annual growth sales of 17% for the past 5 years (1974-1979) and improved net margins to 9.5% by 1979 as the sodium chlorate market remained resilient despite the difficult economic situation. Customers The primary customers of the sodium chlorate producers are the paper and pulp industry, which accounts for approximately 85% of total production. As such, growth in the markets will essentially mirror growth in the pulp & paper industry. The 1970s was a turbulent period for the paper and pulp industry, marked by greatly intensified competition, periods of overcapacity (especially in 1976), a deep recession in mid-decade, rapidly rising inflation throughout the industrial world and a decline in the competitiveness of the U.S. economy as a whole. Despite this, the paper and pulp industry remained resilient with growth expected to pick-up by the 1980s as the U.S. economy recovers and the prospect for substantial future growth in the worldwide use of pulp and paper. As such, the outlook for the sodium...
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...Case Study 2: Rocky Mountain Advanced Genome This paper provides an objective valuation of Rocky Mountain Advanced Genome (RMAG) to be adopted by Big Sur regarding the purchase of a 90% equity stake for $46 million. Forecast Horizon: The forecast horizon was lengthened to 15 years, as RMAG is a young, “highly promising, high risk” firm, only established 15 months prior, it should reach maturity in 2010 as sales, expenses and free cash flows stabilise (Fig.1). RMAG exhibits characteristics of a high growth firm with no dividends, high risk, high CAPEX expenditures and no leverage. Furthermore, it would be inadequate to adopt the forecast horizon dictated by RMAG and Big Sur of 10 years as cash flows only breakeven in Year 8 (Fig.2). Ohlson & Zhang (1999) affirmed that “Casual observation suggests that the horizon rarely exceeds 15 years” yet a planning period of 15 years is appropriate as RMAG has heavy R&D expenses that generate products with lengthy development stages and greater time until profit realisation. Cash flow forecasts provided by RMAG management and Big Sur analysts for the next ten years were analysed and accounts over the 1995 to 2005 were averaged as, “cash flows can be biased as a result of managers being either too conservative or too optimistic” (Titman et al. 2011). RMAG’s forecast was biased upwards whilst Big Sur’s forecast was relatively conservative. Hence, a hybrid of the two forecasts was adopted to negate bias over 1996-2005 and forecasts for...
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...impact on valuations based on multiples. It broadly describes the need for relative valuation which is increasingly used in assessing individual business or corporations. On a theoretical level, it captures the advantages and shortcomings of multiples. It also describes why the multiples differ from one institution in one sector to another whilst addressing the factors that cause the anomalies. In addition it highlights what the value drivers are behind the multiples and the significant role they play in arriving at multiples. Alongside the paper also details how these value drivers are systematically aligned in producing results. It emphasizes largely on enterprise valuation, and the different methods used in Enterprise valuation, formulas and application. The basic conclusion is that multiples nearly always have broad dispersion, which is why valuations performed using multiples may be highly debatable. 1. Introduction Valuation is the process of determining the current worth of an asset or a company in the financial aspect. There are many techniques that can be used to determine value, some of which might be subjective and the others objective. Judging the contributions of a company's management would be more of a subjective valuation technique, while calculating intrinsic value based on future earnings would be an objective technique. However, this paper will exclusively focus on valuation with multiples which is based on the method of relative valuation. 2. Literature...
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...Option Paper Introduction This paper discusses various methods available to organizations when seeking financing for special projects, namely a Casino / Resort hotel complex with a projected budget of $600M. The various methods described include the analysis of capital valuations modeling with respect to the cost of various debt and equity measurements available. Long-term finance alternatives are presented, as are the different sources of capital available to organizations. The paper concludes with a look at various cash management techniques needed by the Casino / Resort for operating as well as the various methods of short-term financing. Capital Valuation Models Capital modeling provides common metrics for risk and reward analysis that can be used to compare the risk-adjusted profitability and the relative cost of capital for a wide range of capital sources. Modeling capital allows one to evaluate the overall capital adequacy in relation to the risk tolerances and profile of your business segments. To properly analyze risk, management needs to consider how they will determine and fund an adequate level of economic capital for a business venture, such as a Casino / Resort hotel complex. There is a need to develop an economic valuation methodology and model that is consistent and comprehensive. The intent of this capital analysis is to assist with performance assessment and decision-making. You will need to develop scenarios focusing on various sources of capital you...
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...Case Study 1: JetBlue Airways IPO Valuation 08 Fall AFF5300 Case Studies in Finance- March 2013 Executive summary This report examines the decision of JetBlue management to price the initial public offering (IPO) of JetBlue Stock on the April 2002, a few months after the terrorist attack in September, 2001. First, the paper provided a brief introduction to JetBlue Airways and its industry. This paper revealed JetBlue’s innovative strategy and the associated strong financial performance over its initial two year. It followed by, a discussion on the advantages and disadvantages of going public (IPO) for JetBlue. The paper later provided an insight analysis of the company comparison multiples valuations (EBIT and PE multiples valuations) and the discounted cash flows to value JetBlue’s share price. It reached a conclusion that JetBlue Airways IPO should be in a range of $25 to $26 per share. By: Tam Huynh (24675512) Contents 1.0 Introduction 2 2.0 The Airline Industry and JetBlue 2 3.0 JetBlue’s Going Public 2 3.1 The Advantages of going public 3 3.2 The Disadvantage 3 4.0 JetBlue’s Valuation 3 4.1 The comparable Companies Analysis 3 4.1.1 P/E Multiple 3 4.1.2 EBIT Multiple 4 4.2 Discounted Cash Flow Analysis 5 4.2.1 Weighted Average Cost of Capital 5 4.2.2 Discounted Cash Flow Share Price Valuation 5 5.0 Recommendations and Conclusions 5 References 7 1.0 Introduction The terrorist attacks of September 2011 had a severe...
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...Executive Summary The primary purpose of this paper is to examine the various valuation factors that affect the financial performance of a particular company. This paper also includes research which involves a current literature review about the possible causes of both positive and negative outcomes of a company’s financial performance. The methodology used is qualitative research. The major findings entail that the nature of the business and its history is the greatest factor that most likely should be the central focus of the business itself. It can then be realized that the company’s value can be best assessed once it is determined that it has stayed in the industry for a long period of time. Introduction The business industry, above all else, is considerably one of the most complicated sectors of the economy. Nonetheless, businesses are, up to the extent, concentrated on providing the best to their customers and at the same time, on performing well in the market. So to say, the primary goal of any company is to become globally competent and successful in the industry. This objective is what mostly keeps the companies driven to continuously improve itself, its processes, its products and its services. In light with all of this, the value of companies is chiefly influenced by several factors. These factors somehow contribute to the outcomes of the financial performance of the company. More than that, these aspects are deemed to be the most important that every...
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...discounted cash flow valuation methods. Different alternatives for determining the discounted value of tax shields and their implications for the valuation∗ Pablo Fernández PricewaterhouseCoopers Professor of Corporate Finance IESE Business School, University of Navarra Camino del Cerro del Aguila 3. 28023 Madrid, Spain. E-mail: fernandezpa@iese.edu Abstract This paper addresses the valuation of firms by cash flow discounting. The first part shows that the four most commonly used discounted cash flow valuation methods (free cash flow discounted at the WACC; cash flow for equityholders discounted at the required return on the equity flows; capital cash flow discounted at the WACC before taxes; and Adjusted Present Value) always give the same value. The disagreements in the various theories on the valuation of the firm arise from the calculation of the discounted value of tax shields (VTS). The paper shows and analyses 7 different theories on the calculation of the VTS: Modigliani and Miller (1963), Myers (1974), Miller (1977), Miles and Ezzell (1980), Harris and Pringle (1985), Ruback (1995), Damodaran (1994), and Practitioners method. The paper also shows the changes that take place in the valuation formulas when the debt's market value does not match its book value. JEL Classification: G12, G31, M21 October 16, 2008 (First version: July 2, 1999) Another version of this paper may be found in chapters 17, 18, 19 and 21 of the author's book Valuation Methods and Shareholder...
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...Indian Institute of Management Kozhikode Valuation of Brand “Coca-Cola” Project Report, Valuations and Real Options Submitted to: Professor Abhilash Nair GROUP 1, Term V 1. Harshit Boob (PGP/15/143) 2. Saurav Agarwal (PGP/15/319) 3. Siddhartha Roy (PGP/15/321) Valuation of Brand “Coca-Cola” 2012 Contents Executive Summary....................................................................................................................................... 3 COCA-COLA Company ................................................................................................................................... 4 Coca-Cola Brand ............................................................................................................................................ 6 Relevance of the Study ................................................................................................................................. 6 Why Coca-cola .............................................................................................................................................. 7 Objective of the Study .................................................................................................................................. 8 Literature Review .......................................................................................................................................... 8 Data Source .............................................................................
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...International Finance: A Course Overview Mihir A. Desai* Harvard University and NBER ABSTRACT This paper describes the International Finance course at Harvard Business School for instructors considering adopting the associated material. The paper begins by arguing that the forces of globalization have fundamentally changed the scope and activities of firms thereby altering the practice of finance within these firms. As a consequence of an increasing reliance on tightly-integrated foreign operations, a parallel world of finance has been opened within every multinational firm and this world has, heretofore, been overlooked. The course materials are designed to address the many aspects of financial decision making within global firms prompted by these changes that are not addressed in traditional materials. The paper provides an overview of the structure of the course and its seven modules with particular emphasis on the three modules that constitute the core of the course. The paper also describes an analytical framework that has been developed through the creation of the course materials to guide critical financial decisions on financing, investment, risk management and incentive management within a multinational firm. This framework emphasizes the need to reconcile conflicting forces in order for multinational firms to gain competitive advantage from their internal capital markets. The paper concludes with a discussion of the course's pedagogical approach and detailed descriptions of...
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...the fundamental asset value concept. In other words, assessments of each individual business must be based on its ability to generate added value, rather than on subjective concepts. In our opinion, the economy of the future must become an economy of real values. How to achieve this is not so clear-cut. Let us think about it together.” From the Address of Vladimir Putin, Prime Minister of Russia, at the Davos Economic Forum (February, 2009) This Part analyzes the pre-analytical foundations and macro-economic impact of the Modern Portfolio Theory1 (MPT) tenets, on which much of the present Western investment theory and financial economics is erected. Our general inference is that while the former are tautological at their core and treat capital investment pricing processes as if those relate to an impersonal network of natural oscillators, the latter are perceivably dangerous in spite of the belief in the strong ‘performativity’ (self-fulfillment) of MPT (McKenzie, 2006). Performative the MPT may be, but this performativity comes it a cost: as year by year it only removes the universe of traded...
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