GUIDANCE ON ASSIGNMENT 2
VALUATION & FINANCIAL MODELLING (FIM301)
Lecture:
Email:
Due date:
Nguyen Thi Mai Lan
[email protected]
9 Nov 2012 FB0504
15 Nov 2012 FB0602
Group report 2:
Prepare company's
Expected return on a one-year bond with an adjustment for default probability
Face value (F)
Price (P)
Annual coupon rate (Q)
Default probability
Recovery percentage
Expected period 1 cash flow
Expect
QUESTION SHEET 3
1. You have been asked to estimate the cost of equity for Holton Holdings, a firm with
operations in three different businesses retailing, hotels and travel. You have
collected inform
QUESTION SHEET 4
1. You have been asked to estimate the cost of equity for ABC Ltd., a firm with
operations in three different businesses Banking, Steel and Retailing. You have
collected information o
QUESTION SHEET 5:
1. AlumCare Inc, which maintains and runs health maintenance organizations, has a
price/book value ratio of 4. It merges with HealthSoft Inc, a corporation that owns
and runs hospita
QUESTION SHEET 6
1. You have been given a list of software firms and have been asked to analyze them based
upon the PEG ratio, taking into account any fundamentals that might cause PEG ratios to
vary
QUESTION SHEET 7
1. The following questions all relate to earnings or book value multiples.
a. When interest rates decrease, the price earnings ratio for a firm
will
become more sensitive to changes i
QUESTION SHEET 8
1. Estimate the Modified duration of a government bond with a coupon rate of 10% and a 5year maturity, if the yield to maturity on the bond is 8%. You can assume that the coupons are
QUESTION SHEET 9: REVISION
1. (Fall 1998) You want to estimate the country risk premium (over and above the
base equity premium) to charge for a company listed in Indonesia, and have been
supplied wit
SETTING UP THE FINANCIAL STATEMENT MODEL
Sales growth
Curent assets/ Sales
Current liabilities/ Sales
Net fixed assets/ Sales
COGS/ Sales
Depreciation rate
Interest rate on debt
Interest paid on cash
SETTING UP THE FINANCIAL STATEMENT MODEL
SENSITIVITY ANALYSIS
Sales growth
10%
Curent assets/ Sales
Current liabilities/ Sales
Net fixed assets/ Sales
COGS/ Sales
Depreciation rate
Interest rate on de
SETTING UP THE FINANCIAL STATEMENT MODEL
Sales growth
Curent assets/ Sales
Current liabilities/ Sales
Net fixed assets/ Sales
COGS/ Sales
Depreciation rate
Interest rate on debt
Interest paid on cash
LECTURE 1 (CONT) + LECTURE 2
RISKLESS RATE AND RISK PREMIUM
COST OF CAPITAL
By Lan Nguyen
Damodaran: Chapter 7
Aswath Damodaran
1
Discounted Cash Flow Valuation: The Steps
s
Estimate the discount rate
Lecture 1:
An Introduction to Valuation
By Lan Nguyen
Damodaran: Chapter 1,2
Aswath Damodaran
1
Misconceptions about Valuation
s
Myth 1: A valuation is an objective search for true value
s
Myth 2.: A
LECTURE 3:
Financial Statement Modeling
Financial
By Lan Nguyen
Text book: Chapter 3
Basic corporate valuation
model
model
Enterprise value =
Free cash flows,
Present Value
discounted at WACC
TheEn
Lecture 4: FIRM VALUATION:
COST OF CAPITAL AND APV
APPROACHES
APPROACHES
By Lan Nguyen
Ref 1: Chapter 15
Free Cash flow to the Firm
Free
Sum
of the CF to all claim holders in
the firm (stockholders, b
Lecture 6:
Financial Analysis of Leases
Financial
By Lan Nguyen
Text book: Chapter 5
Terminology
Terminology
Lessee:
User/renter of the asset
Lessor: Owner of asset
Receives periodic rent
Receives d
Lecture 7:
Fundamental Principles of
Relative Valuation
- Earnings multiples
By Lan Nguyen
Ref 1: Chapter 17,18
Aswath Damodaran
1
The Essence of relative valuation?
s
s
In relative valuation, the val
Lecture 9: Duration
Lecture
By Lan Nguyen
Text book: Chapter 20
Definition
Definition
Duration is a measure of the sensitivity
of bond price to changes in the interest
rate at which the bond is discou
Lecture 10: Immunization
Strategies
Strategies
By Lan Nguyen
Text book: Chapter 21
Definition
Definition
If
a bond portfolio has the same payoff
at some specific future date, no matter
what interest-r
Calculating Abbott's Cost of Debt
Method 1: Abbott's Average Cost of Debt
Million $
Long term debt
Short term debt and current portion of long term debt
Total debt
End 2011
2011 Interest expense
Inter
ASU ID: 1211583214/1211603533
Post Box # 1726
Case Assignment # Dividend Policy at FPL Group
1.
What should you recommend to your clients regarding FPLs stock buy, sell, or hold?
Florida Power & Light