Corporate Finance, Excel Calculation and Equity Valuation

Running head: CORPORATE FINANCE
Corporate Finance, Excel Calculation and Equity Valuation
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CORPORATE FINANCE
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Executive summary:
The assessment directly uses Residual earnings analysis and discounted cash flow method for
identifying the valuation of American Eagle Outfitters. The company is a lifestyle clothing
and accessories retailer, which was founded 42 years ago and is situated in Pennsylvania US.
The company has 929 locations all over the world, which has allowed them to generate
adequate revenue and income in the past fiscal years. The product range of the organisation
stretches from Apparels, accessories, lingerie, personal care, and footwear. The current
economic and industry condition is considered to be a property as business in the United
States has been flourishing after Presidency of Donald Trump. The reduction in corporate tax
rates and benefits to capitalization has allowed businesses to increase its revenues show the
period of time. the current retail clothing market of United States and the world flourishing as
more and more stores are opening worldwide which increases the competition level in the
industry.

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Table of Contents
Introduction:...............................................................................................................................3
Company background and Industry overview:..........................................................................3
Residual earnings Valuation:.....................................................................................................3
Discounted Cash Flow Valuation:.............................................................................................4
Providing relevant justification for the usefulness of both the techniques:...............................5
Recommendation and conclusion:.............................................................................................8
References and Bibliography:..................................................................................................10

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Introduction:
The assessment aims in detecting the fundamental valuation of American Eagle
Outfitters Inc. under discounted cash flow and residual earnings method. The fundamental
analysis allows the investor to determine the intrinsic value of the firm, which helps in
detecting the book value of the firm. Thus, the measurement used for American Eagle
Outfitters Inc. can eventually help the investor in understanding the book value of the firm
and determine whether they are undervalued or overvalued.
Company background and Industry overview:
American Eagle Outfitters Inc. is a lifestyle clothing and accessories retailer, which
was founded 42 years ago and is situated in Pennsylvania US. The company has 929
locations all over the world, which has allowed them to generate adequate revenue and
income in the past fiscal years. The product range of the organisation stretches from
Apparels, accessories, lingerie, personal care, and footwear. The organisation has maintained
their expansion with the online shopping platform, which has helped in raising brand
recognition in new markets.
Residual earnings Valuation:
Residual Earnings Method
Particulars 2015 2016 2017
Comprehensive Earnings $ 198,214,000 $ 205,855,000 $ 209,830,000
Book value of equity $ 1,051,376,000 $ 1,204,569,000 $ 1,246,791,000
Return on equity 10.70% 10.70% 10.70%
Equity change $ 112,507,891 $ 128,901,095
Residual Earnings $ 93,347,109 $ 80,928,905
Discounting factor 1.107 1.225
PV of Residual Earnings $ 84,323,626.29 $ 66,038,996.99
Total RE $ 150,362,623.29
CV $ 921,742,422.92