Corporate Evaluation of Philip Morris International
Study Programme

Master of Business Administration (MBA)

Module: Assignment: Course Instructor:

Financial Management No 1/1

Authors:

Student ID Number:

1st Academic Semester 2013

Place, Date

Dortmund, 28th February 2014

Corporate Evaluation of Philip Morris International

I

Executive Summary
The task of this assignment was to evaluate a company (if possible, listed) by two different evaluation methods: DCF method and multiplier method. The DCF analysis is divided into two separate evaluations: DCF entity method (WACC) and DCF equity method. In addition to calculating a corresponding theoretical foundation as well as a critical analysis of assessment methods / results was expected. Philip Morris International, as one of the biggest cigarette sellers of the world, is evaluated in this assignment to date of 31st December 2012. During evaluation by multiplier method the multipliers “price-earnings-ratio” and “market capitalization / EBITDA” were chosen and as peer companies British American Tobacco p.l.c., Imperial Tobacco Group p.l.c. and Japan Tobacco Inc. were used. The result of Philip Morris International evaluation by multiplier method is a value between $111 billion and $160 billion. The theoretical analysis of the different evaluation methodologies indicated that an evaluation by multiplier method can only give a rough guidance of the real corporate value. The evaluation by DCF method result a company value of Philip Morris International between $120 billion (Equity approach) and $152 billion (Entity approach). In this assignment it is clear that each of the evaluation methodologies may exert advantages and disadvantages. It also explicit that any evaluation method can be influenced both positively and negatively, e.g. by changing the WACC, interest rate, multiplier and peer