report on valuation methods and shareholder value analysis of an approved non-service listed company (Must be listed UK companies in the London Stock Exchange) custom essay

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The assignment is a report on valuation methods and shareholder value analysis of an approved non-service listed company. The company chosen should be one of the top 350 listed UK companies in the London Stock Exchange. Each group will consist of three students. Please confirm with your seminar Tutor that your chosen company is appropriate.

Coursework Assignment Outline:

Assume that you and your colleagues are working in the corporate financial advisory services department of a large investment bank and your director (who has read extensively about shareholder value analysis) has asked you to prepare a shareholder value analysis and a short-term valuation report on your chosen company using the following basis for your valuation:

? Planning period is to be set at seven years
? A residual value based on constant cash flows from year seven onwards (infinite life) will be estimated at the end of this seven year period
? Beta factor to be obtained using current information held on DataStream or other sources
? FTSE All-share return to be taken as 8%
? Risk free rate to be taken as 3%
? The target capital structure to be set based on the company last financial year (preferably 2011)
? The gross cost of debt over the financing period is to be estimated at 5% per annum
? As for the other key value drivers (forecast sales growth rate, operating margins, tax rate, incremental working capital requirements and incremental fixed asset investment) you are required to decide these yourselves. The director have advised you to review the latest annual report and accounts of your chosen company and use the data therein and other financial journalistic analysis and intelligence that you consider appropriate to help you decide upon the growth levels of your chosen drivers.


Part A:

1. Using the information on certain key drivers already given above together with the other key driver figures decided upon by yourselves, prepare a spreadsheet based shareholder value analysis model to determine a purchase price for your chosen company. A short report explaining how the valuation method works and the purpose of each stage in the spreadsheet calculations should support the model.

(Marks allocated: 40% – 1,000 words excluding appendices)

2. Review the certain value driver’s assumptions given above and growth levels suggested by you for other drivers and write a brief report justifying or criticising the growth levels of the chosen drivers.

(Marks allocated: 20% – 500 words excluding appendices)

Part B:

Compare and contrast the three company valuation techniques: net asset value; price-earning multiples and discounted cash flow. Use any real life examples from your selected company to endorse your statements on each valuation method.

(Marks allocated: 20% – 500 words excluding appendices)

Part C:

Write a brief report discussing if your selected company’s shares are under- or over-valued using the results obtained from the short-term valuation techniques.

(Marks allocated: 20% – 500 words excluding appendices)

Hard copies of your calculations and your chosen company’s annual reports over the seven year period should be included in appendices together with a disk containing the SVA model. The disk should be properly labelled with your names & student numbers and should have gone through the virus check system.

You are expected to make full use of all the facilities offered by the University libraries and other sources. Examples of other sources of information include the Financial Times, the Economist, Investors Chronicle, Fame database, DataStream, Excel cards and databases.

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