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Essay / Research Paper Abstract
This 4 page paper answers questions set by the student. The first three questions value Dell shares using projections for 2008/9, 2009/10 and 2010/12. The next question looks at firms that may wish to acquire Dell and why and then suggests an acquisition strategy. The bibliography cites 1 source.
Page Count:
4 pages (~225 words per page)
File: TS14_TEdellvalu.rtf
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Unformatted sample text from the term paper:
of computers and complementary goods. When valuing the shares an interesting model that can be used is that of the dividend discount model. This is a discounted cash flow model
and allows for share to be valued with reference to the its value as an investment, measured through its dividend, or earnings per share which will, eventually, come to the
shareholders. The calculation starts off with a capital assets pricing model calculation in order to calculate the risk adjusted rate to be
used for discounting the cash flows. The CAPM equation is E(R) = r + (ERP x beta) where E (R) is the expected rate of return, r is
the risk free rate of return and ERP is the expected rate of return for the market, This gives a figure which can be used to assess the rate of
return that would be required in the current market conditions (the cost of equity). Dell currently has a beta of 1.42, the
current risk rate is the rate used on the T bills will be used; this is currently 1.14% on a 2 year bill and the benchmark return on the stock
market is 5%, this gives a risk adjusted discount figure of 7.02%. Carrying this into the dividend discount model the input figures require are the earrings per share and the
excepted rate of growth, which can be discounted using the discounted figure already calculated, With EPS of $1.01 (based in the last twelve months (Yahoo Finance, 2009), and an average
estimate of growth at 17.82% (taking earrings from ?1.01 to $1.19) assumed for the next year falling to 3^% are annum growth after than this will give a DDM
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