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Corporate Financial Information Assignment

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Added on  2020-07-22

Corporate Financial Information Assignment

   Added on 2020-07-22

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CORPORATE FINANCIALINFORMATION
Corporate Financial Information Assignment_1
TABLE OF CONTENTSWay in which valuation method work and purpose of each stage in valuation model...................3Evaluating assumptions...................................................................................................................4REFERENCES................................................................................................................................6APPENDIX......................................................................................................................................7
Corporate Financial Information Assignment_2
·Way in which valuation method work and purpose of each stage in valuationmodelIn the present research study discounted cash flow valuation method is used. Under thismodel first of all free cash flows are computed. Free cash flow refers to the amount that isgenerated by considering all sort of expenses in the business whether same are operating, nonoperating, capital expenditures and working capital changes. It can be said that all sort of cashinflow and outflow amount are taken in to account in order to compute free cash flow amountfor computing fair value of shares (Hellman and Fröberg, 2016). After computing free cash flowestimated values of mentioned variable are discounted at WACC rate which is also known asweighted average cost of capital. Enterprise value is computed on the basis of present value ofterminal value and sum of present value of free cash flows. Same is used to calculate equityvalue which is divided number of shares issued and by doing so share price of each share iscomputed in context of the business firm. In this way entire valuation method work.Stages of the equity valuation is given below.·Calculation of beta value: Main purpose of performing this stage is to get input forcomputing cost of equity. In this regard CAPM model is applied and under this byconsidering risk free rate of return, beta and return that market may generate cost ofequity is computed.·Computing weighted average cost of capital: Weighted average cost of capital iscomputed to identify overall cost of capital. The other main purpose of performing thistask is to identify rate that can be used to compute overall cost of capital for computingpresent value of cash flows (Jackson, 2016).·Estimating revenue and net operating profit after tax: It is the another important stageof valuation and under this main purpose is to make estimation of revenue so that finallyfree cash flow can be calculated in the model (Enterpise and equity values, 2017). Thisvalue is further used to compute fair value of shares. Net operating profit after tax iscomputed to reveal the impact of consideration of CAPEX, working capital changes anddepreciation on the free cash flow.3 | P a g e
Corporate Financial Information Assignment_3

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