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Business Valuation

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Болжмор Содоо

on 8 June 2015

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Transcript of Business Valuation

Strategy Analysis
Decomposition of return on equity /ROE/
A. Calculate free cash flows to equity, abnormal earnings, and abnormal earnings growth for the years 2009 – 2011.
Problem 2:
Team 1:
N.Sodontuya /103035176/
G.Dolgorsuren /103035156/
N.Buyandelger /103035162/
E.Turmunkh /103035173/

Strategy analysis
Decomposition of ROE
Case Problems
Founded in 1989
One of top 3 consumer notebook brand
Rivalry in existing firms /High/
Rivalry in existing firms /High/
Threat of new entrants /High/
Threat of substitute products/Medium/
Bargaining power of buyers
/Medium to High/
Bargaining power of suppliers/Low/
Decomposing Profitability: Traditional Approach
Decomposing Profitability: Alternative Approach
Definitions of accounting items used in ratio analysis
Distinguishing operating, investment and financing components in ROE
Problem 1:
Starite Company is valued at €20 per share. Analysts expect that it will generate free cash flows to equity of €4 per share for the foreseeable future. What is the firm's implied cost of equity capital?
C. Estimate the value of Hugo Boss’ equity on April 1, 2009 using the above forecasts and assumptions. Check that the discounted cash flow model, the abnormal earnings model and the abnormal earnings growth model yield the same outcome.
B. Assume that in 2012 Hugo Boss AG liquidates all its assets at their book values, uses the proceeds to pay off debt and pays out the remainder to its equity holders.

What does this assumption imply about the company’s:
a. Free cash flow to equity holders in 2012 and beyond?
b. Abnormal earnings in 2012 and beyond?
c. Abnormal earnings growth in 2012 and beyond?

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