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Essay / Research Paper Abstract
This 9 page paper uses three different valuation models to assess what the share price of a company should be. The paper looks first at book value and how this may be used as a foundation for valuation before moving onto the dividend discount model, DDM, and the capital asset pricing model, CAPM. The paper uses an example provided by the student to illustrate the different models. Each model is discussed, looking at the advantages, disadvantages and the best scenarios for its' use. The bibliography cites 2 sources.
Page Count:
9 pages (~225 words per page)
File: TS14_TEshrvalue.rtf
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Unformatted sample text from the term paper:
based on differing aspects of share valuation such as asset based methods, cash flow methods, options based methods and the use of comparables. In this paper we will look at
three different ways of valuing shares and consider where and when they are most suitable. The most basic way of valuing shares is by looking at the book value.
The value of the physical assets of company is used to give the book value of a firm. The book value may be defined as the net assets of a
company, that is the assets less the liabilities. In this paper we will uses the formula of book value being total assets, less total liabilities plus any preferences stocks that
are outstanding. Assets may or may not include the intangible assets. This is a figure that is used in ratio analysis in terms of the book value per share.
This is seen where the book value is divided by the number of share outstanding. This will give a book value per share and show how much of a share
value is supported by underlying assets. If we look at the company example supplied by the student we can add together the various assets and deduct the liabilities to give
us a book value. In this paper we will consider the debentures as liabilities as they are shares which have been issued and have a redemption date. To
calculate this we need to know how may shares are outstanding and the total amount of the assets. Although we are not told directly how many shares are outstanding we
are told that there was 2 million worth of shares issued with a share price of 5 cents. Therefore we only need to divide the number amount in revenue from
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