Step 1:

Perform a Dupont style ratio analysis (i.e. using your macro driven profitability system) of all companies to determine, if possible, those performance aspects of the company that make it a takeover target (or dictate a public offer).   For example, failure to earn a reasonable return over the last few years as indicated by appropriate accounting ratios and/or the Net Asset Backing per share compared to the share price (or need for new capital for expansion vs. debt retirement).

 

Step 2:

Develop a risk assessment model and subject your company to your model as well as those models developed by Altman and by Castagna and Matolcsy.  Also develop a model to assess and test for earnings management. Test these models on all of your companies and discuss the relevance of the models to your takeover analysis.

 

Step 3:

Most valuation models require future projections of earnings, dividends and/or cash flows. The financial records for the business represent the logical departure for any future projections. Students should therefore address:

• The accounting issue: What are the true earnings for the period?
• The business issue: What does the earnings record imply about the future

earning power of the company?

• The  security  valuation  issue:  What  aspects  of  past  earnings  power  are

permanent and what are transitory?

 

Step 4:

1. Determine the projected earning, dividends, and cash flows based on the analysis of past accounting data for your target company (hereafter called the target) or IPO.

 

 

 

Step 5:

After your initial analysis and estimation for your in‐depth company you may consider that your data needs to be adjusted.  Your adjustments might include, but are not limited to, the following:

1. Adjustments to future earnings rates due to industry, market or international trends applicable to the business.

 

1. Adjustments to the asset base for assets to be sold such that you use a combined asset value and earnings approach similar to the Bundaberg Sugar valuation you have been given.

 

1. Adjustments for accounting method choices and distortions.

 

 

Step 6:

Value the companies using an appropriate method.  It stands to reason that, given the data amassed above; you should experiment with several valuation methods as covered in class. These might include, but are not limited to, the following fundamental methodologies:

• Discount anticipated earnings to perpetuity
• Discount anticipated earnings to a terminal date
• Discount anticipated dividends to perpetuity
• Discount anticipated dividends to a terminal date
• Discount anticipated cash flows to a terminal date
• Capitalisation of current earnings
• Composite model for intrinsic valuation (Ohlson Style)Place your order now for a similar paper and have exceptional work written by our team of experts to guarantee you A Results

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