Evaluate the qualitative factors that impact a business

Assignment Help Financial Management

Reference no: EM131159070

Question 1

Word limit: 1800 words

LO2: Apply earnings capitalisation multiples and other methodologies to value businesses and securities.
LO3: Analyse the results of a valuation of a business or equity securities.

Note: You need to construct a spreadsheet for your answers to (a), (c) and (e). It should be clearly marked ‘Worksheet 1'. The Excel spreadsheet needs to be uploaded separately to the Word document that contains your report when submitting your assignment. Be sure to cross reference your material clearly.

(a) Analyst 1 has undertaken a discounted cash flow (DCF) equity valuation of AZJ, as a whole and on a per share basis, using only the information provided above to generate a proxy for cash flow to stakeholders (i.e. debt providers and shareholders) and a terminal value of 8 times EBITDA.

Replicate Analyst 1's workings, assuming the basis of the workings is correct.

(b) What are the principal shortcomings of Analyst 1's valuation approach in general, and in the way it is applied to AZJ?

(c) Analyst 2 has also undertaken a DCF equity valuation of AZJ, as a whole and on a per share basis, using only the information provided above but using forecast cash flows attributable to equity holders and a terminal value of 25 times earnings.
Replicate Analyst 2's workings, assuming the basis of the workings is correct.

(d) What are the principal shortcomings of Analyst 2's valuation approach in general, and in the way it is applied to AZJ?

(e) What range of values would Analyst 3 derive for AZJ, as a whole and on a per share basis, based on all the information provided above for comparables, Asciano and Toll Holdings?

(f) What are the principal shortcomings of Analyst 3's equity valuation approach in general, and in the way it is applied to AZJ?

Question 2

Word limit: 2200 words

LO1: Evaluate the qualitative factors that impact a business and its industry.
LO3: Analyse the results of a valuation of a business or equity securities.

The recent sell down of the government's stake in the business represents a value reference point. You are required to prepare a report for the chief investment officer (CIO), which analyses the value of the business in reference to the recent events. The CIO has left copies on your desk of the following documents. These documents are provided on the ‘Assignment' page of KapLearn.

• QR National share offer document
• AZJ 2013 annual report
• Queensland Rail (QR) 2005 draft access undertaking including pages relating to WACC calculations
• a hand-scribbled memorandum, which outlines the following four key issues (see (b)) they expect to be addressed in your report.

Note: Your report should be set out as per the sections below.
(a) Valuation
Provide your view of a fair value range for the ordinary share valuation (per unit) of AZJ as at 31 December 2013 with supporting spreadsheet calculations. Your workings should be clearly marked ‘Worksheet 2' on your spreadsheet and clearly referenced in your report. In forming this view, the CIO has asked that you must not limit yourself to the comparables and the forecasts of the junior analysts. In fact, you must seek to overcome their shortcomings - for example, the analysts limit themselves to relatively simplistic forecasts and comparables. You must prepare your own forecasts, include new comparables and include a discussion on AZJ's real options in your framework.

(b) Analysis
Provide an analysis of the factors that would critically affect your forecast and hence your valuation. The CIO has listed:

• access network that the regulator has allowed versus growth and sustenance capex in the unregulated areas

• state ownership overhang, both in respect of a large parcel of shares that may be sold and influence, if any, on management

• escrow conditions and liquidity issues surrounding your stake (if purchased)

• AZJ's stated intent to buyback up to 10% of the shares outstanding and how that could positively or adversely affect the valuation and your decision as their four major concerns, but asked that you not limit yourself to just addressing those concerns. (10 marks)

(c) Recommendation
Make a firm recommendation (a clear yes or no) on whether the manager should accept the invitation to participate in the off-market transaction and if yes, to what extent.

Provide a summary of the reasons for your recommendation.

Attachment:- Assignment--Business Valuation.rar

Reference no: EM131159070

Questions Cloud

Define evolution using the course materials : Using the APUS Library, find at least one appropriate outside source that identifies one specific research project in which physical anthropologists are studying evolution (e.g. the Human Genome Project). Describe the research project and its sig..

Do you agree with what these governments are doing : In responding to the question below, keep in mind that according to the Western conception of democracy, which both Turkey and France claim to uphold, government should treat all citizens with dignity and respect, which includes protection of thei..

What do they recognize as mental illness : How do different attitudes about nursing, weaning, and sleeping arrangements affect young children? How are differences in these practices compatible with the needs of the cultures that employ them? Provide ethnographic examples from our readings..

Using b-tree of order three shown in figure add given number : Using the B-tree of order 3 shown in Figure, add 50, 78, 101, and 232. Using the B-tree of order 3 shown in Figure, delete 63, 90, 41, and 60. Using the B-tree of order 3 shown in Figure, add 50, 78, 101, and 232.

Evaluate the qualitative factors that impact a business : What are the principal shortcomings of Analyst 1's valuation approach in general, and in the way it is applied to AZJ?

How do cultures choose what to culturally borrow : How do cultures choose what to culturally "borrow" from other cultures? Do only less developed countries borrow from more developed countries? What's a custom you would like to "borrow" from another culture if you had the opportunity?

Is it considered negative to say bill is ethnocentric : Is it considered negative to say, "Bill is ethnocentric"? What does this term mean to you? Is ethnocentrism something that only the U.S. engages in? Give an example of ethnocentric behavior you've observed.

Describe two essential conditions for islamic marriage : Based primarily on the article "Changing Women's Role in Islamic Society," briefly explain three rights that Muslim women have. Also, explain why these rights have not been uniformly practiced throughout the Muslim world.

Write the search algorithm for a b-pluse tree : Write the search algorithm for a B+tree. Rewrite the B-tree deletion algorithm using a stack instead of recursion. Rewrite the B-tree insertion algorithm using a stack instead of recursion.

User Account

All Pages