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Essay / Research Paper Abstract
This 11 page paper answers three questions set by the student. In the first two questions there is a company that needs to be valued, methods used include book value, dividend discount model and capital asset pricing model. The last questions performs a free cash flow calculation. The bibliography cites 1 source.
Page Count:
11 pages (~225 words per page)
File: TS14_TEvalcomp.rtf
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Unformatted sample text from the term paper:
be used is the book value. This is the value of the firm taking only the assets less the liabilities. Table 1 Book Value Total assets 413,910 Total
liabilities 93,000 Book value 320,910 The book value is an interesting value as it looks only at the physical value, but a business is note than this, it is also
has the future income streams and as such we can argue that the value should be greater than just the assets as a business is an investment. For this
we can look to the Dividend Discount Model. The rationale behind this model is that the value of a share should be
calculated by reference to the current value of future dividends. The idea is that the real value is not in the speculation of earnings and the way that the market
behaved, that the best way to measure the value of a stock should be by looking at the money it will produce. This is likely to produce less irrational returns
than those that create the large swings in stock valuations on the stock market (Howells and Bain, 1998). This is therefore a conservative valuing tool. The model is best used
when there is a stock that is making regular dividend payments, but it can be used for other companies; theoretically retained earnings should eventually become dividends (Howells and Bain, 1998).
There are two different models that can be used, the first is the stable model. For this, we need to calculate the input figures. The first figure is the
dividends that are expected within one year we will call this DPS(1) (Howells and Bain, 1998). The second is the rate of return that is required for the investment, this
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