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Share Valuation

In: Business and Management

Submitted By HendrikJacobus
Words 5046
Pages 21
Introduction:
The main in this research assignment is to determine whether an investor should buy, hold, or sell the carefully chosen shares. The "Three-step down approach" was used to make conclusions and it also served as a guideline to the research.
The two stocks that were chosen for the research falls within the financial sector, these two are FNB (First Rand Bank) and Nedbank. A brief analysis of the state of the economy and the financial industry was done. Furthermore a thorough investigation and analysis was done in respect of both firms.
The Discounted cash flow and relative valuation techniques are used, both of these uses quantitative information. Cumulative information will also be incorporated to answer the objective and research hypothesis in a scientific and logical way.

Statement of the problem:
The business problem for the purposes of the research assignment is:
Will an investor buy shares in Nedbank or FNB?
If an investor owns shares in Nedbank or FNB, will he keep it or rather sell it?
As an investor, the primary goal is to find the investment that will give you the highest return with the lowest risk. Investors also looks for the investments that can be bought at a discount in order to deliver a higher return on sales when sold, but also to sell the investment at a premium in order to deliver a higher return on the sale of the investment.
To calculate whether the investor is investing at a discount or premium or selling at a discount or premium the investor needs to determine the intrinsic value of the chosen investment and compare the calculated value with the market value.
To determine the intrinsic value of an investment the investor needs to look at the discounted cash flow techniques, the DDM, and Free cash flow to equity (FCFE). An in-depth analysis includes a thorough inspection of the financial statements of a company as well as...

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