Please provide a discussion of basic corporate value components and how we go about valuing these...

Please provide a discussion of basic corporate value components and how we go about valuing these various components of value. Discuss the constant growth model and how we utilize WAAC in that valuation technique.

Solutions

Expert Solution

Corporate valuation is done in order to determine the intrinsic value of the shares so that investment in those companies can be made by shareholder after knowing the true valuation of those shares.

Basic corporate value components are as follows-

A. Profits or earning after interest tax and depreciation-profits are one of the major components in valuation of the company and their use by various analyst in order to determine the true value of the company e through adoption of various methods like price to earnings or price to book value.

B. Dividend payments-dividend payments are another important factor in order to determine the intrinsic value of this year because models like dividend growth models are generally focused at finding out the intrinsic value of the company after ascertainment of the present value of the future dividend associated with the company.

C.cash flows of the company are another component because majority of the companies who are into their initial stages are not able to generate a large amount of profits so they are accordingly valued with cash flows associated with the company so cash flows are another important component in order to determine the value of the company.

There are many other components related to corporate valuations like taxations or present value of abnormal gains aur asset valuation methods Residual Value methods.

Constant growth model is used to find the value of the company through adoption of a frequent growth in overall payment of dividend so these constant growth model will be determining the value of the company after a certain amount of the future value of dividend associated with the company.

Weighted average cost of capital is used as a required rate of return while adoption of constant growth valuation method and that weighted average cost of capital is used to substract the the growth rate of dividend in order to find out the price of the share.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Please provide a discussion of basic corporate value components and how we go about valuing these...

Please provide answers and discussion on all the following: What are the issues in how we...

Please provide answers and discussion on all the following: What are the issues in how we take title to what we own? Remember that neither title deficiencies or any other mechanical issues such as recorded or not have any influence on how we take title. Explain the concept Right of Survivorship. When would a Life Estate be appropriate? Find out how a husband and wife hold title to property in your state.

How do you go about valuing stock of a company.What if a company has no net...

How do you go about valuing stock of a company.What if a company has no net income like many tech companies with high valuations?

Consider the various components we have been discussion from basic insect form and function, diversity, trophic...

Consider the various components we have been discussion from basic insect form and function, diversity, trophic interactions, symbiosis, to the complexities of ecological interactions, and the foundations from your other courses such as microbiology and parasitology- to generate your own hypothetical vector. Select your pathogen, select your insect or arachnid taxon (with justification), potential host(s), and create a vector that is effective at infectious disease spread. Give it a COOL name.

In this discussion we want to think about the explanations of Poverty. Please detail one of...

In this discussion we want to think about the explanations of Poverty. Please detail one of Schiller's approaches to poverty. Do you think this approach is accurate? Why or why not?

Present the components of the basic IS and LM model.How do we use the IS and...

Present the components of the basic IS and LM model.How do we use the IS and LM model to make predictions about policy changes in the economy?

Why do we calculate terminal value when valuing a business if we did not use it...

Why do we calculate terminal value when valuing a business if we did not use it for the team projects? What would influence a Technology industry corporation's make or buy decision if it wanted to add a new IT consulting services division specialized in social media data mining?

how do we go about determining the cost that goes on the Y axis for the...

how do we go about determining the cost that goes on the Y axis for the regression analysis in question 5c on chapter 2a of the Managerial Accounting 14th edition text? thanks.

Please provide a discussion of the numerous implications of doing business abroad and how these issues...

Please provide a discussion of the numerous implications of doing business abroad and how these issues impact and organization. Then provide a detailed discussion of how doing business in countries with different currencies can be particularly challenging and how failure to consider currency risk can have significant negative impact on an MNC.

Please only provide feedback for this discussion: Please provide a specific example of a company you...

Please only provide feedback for this discussion: Please provide a specific example of a company you know or have read about, and how it has demonstrated social responsibility, and how this has benefited the company. Levi Strauss Co. has an initiative for worker well being. This initiative focuses on improving the life of their employees, and as such enables them to be more productive while at work. They also have a campaign called “Water<Less” in which the company is striving...

Subjects