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Essay / Research Paper Abstract
This 4 page paper looks at the way that Garmin shares might be valued when new shares are to be issued, how a new device may be designed to ‘track bad guys’, the potential impact than this may have on earnings and presents a present value earnings calculation for the firms cash flow over a period of five years. The bibliography cites 2 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEgarmin.rtf
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Unformatted sample text from the term paper:
of the firm as a whole. Valuing the shares alone will result is a skew, as if based on the current earnings per share there will be an error as
this valuation calls for the creation of new shares. Therefore, we will calculate a value per share and then multiply this to assess the market value of the firm,
this can then be used to assess the value of the new shares that are to be issued. Using a dividend discount model, based on earrings per share of
$3.07 (Yahoo Finance, 2009). For this we have to make some assumptions, the discount rate is assumed to be 12.48% the current WACC and that there is an expected
growth rate of 5% per annum in the earnings per share this would give a share value of $29.98. With $200,363,000 shares outstanding (Garmin, 2008) this places a value
of the firm of $5,806,519,740. To value the company at this would mean that is more shares were issued the existing number of shares would make up only 95.1% of
the shares. This means a further 10,323,646, which would lead to 210,686,645 shares outstanding. With the current market valuation this would lead to a share price of $27.56 per share.
However the shares are already below this and using the same approach with a market value currently at $23.72 diluting the shares to create the new ones would lead to
a valuation of $22.56. If this is to result in a cash injection which the firm needs there may be the potential for further discounting. Question 2 The
investment is for the development of new devices that could be used to track bad guys by the FBI. There are a number of ways that the devices could be
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