BAFI1045 Investment Project assignment
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Royal Melbourne Institute of Technology
BAFI1045 Investment Company Valuation assignment (BAFI1045)
Added on 2019-11-14
BAFI1045 Investment Project assignment
Royal Melbourne Institute of Technology
BAFI1045 Investment Company Valuation assignment (BAFI1045)
Added on 2019-11-14
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Running head: INVESTMENT PROJECTInvestment ProjectName of the Student:Name of the University:Author’s Note:
1INVESTMENT PROJECTTable of ContentsQuestion 2..................................................................................................................................22.1 Dividend Valuation Model (DDM)......................................................................................22.1.1 Historical Growth..............................................................................................................22.1.2 Forecasted Growth............................................................................................................42.1.3 Intrinsic Value...................................................................................................................42.1.4 Sensitivity Analysis (Constant Growth)............................................................................52.2 Free Cash Flow to Equity Model (FCFE)............................................................................62.2.1 Historical growth rate for FCFE.......................................................................................62.2.2 Forecasted growth rate for FCFE......................................................................................72.2.3 Intrinsic Value...................................................................................................................92.2.4 Sensitivity Analysis for FCFE........................................................................................10Reference and Bibliography:....................................................................................................11
2INVESTMENT PROJECTQuestion 22.1 Dividend Valuation Model (DDM)The Dividend Discount Model (DDM) mainly helps in identifying the overall futurevalue of an organisation and determines whether the current stock price is overvalued orundervalued.Constant Growth Rate ModelMulti-Stage Dividend Growth RateModelVj= Value of stock jD₁= dividend payment for next yearD0= Dividend Payment in the current periodg = the constant growth rate of dividendsk = required rate of return of stock jn= Number of periodsThe above tangle mainly depicts the relevant formula, which could be used indetermining the intrinsic value of the company stock price. In addition, on that behalfinvestors could make adequate decisions of investment (Kilic and Kaya 2015). 2.1.1 Historical GrowthParticulars20162015201420132012Profit margin0.055 0.048 0.100 0.102 0.101 Asset turnoverratio0.021 0.025 0.070 0.116 0.198 Equity multiplier2.731 2.476 2.375 2.106 0.920
3INVESTMENT PROJECTROE0.003 0.003 0.017 0.025 0.019 Particulars20162015201420132012Dividend per share0.080.110.160.170.15Earnings per share0.19920.29170.44310.4570.4217Retention rate0.600.620.640.630.64Particulars20162015201420132012(Dupont) ROE0.0536 0.0565 0.1499 0.1680 0.1830 RR0.5984 0.6229 0.6389 0.6280 0.6443 Growth rate3.20%3.52%9.58%10.55%11.79%G7.73%Table 1: The historical growth rate of DDM (2016-2019) (Source: As created by the author)The table mainly depicts the relevant valuation of Sembcorp, which could be used inthe dividend discount model. 2.1.2 Forecasted Growth Years2016201720182019Dividend Per Shares (cents)6.98 6.09 5.31 Earnings Per Share0.19920.1690 0.1435 0.1217 ROE (Dupont)0.0536 0.0420 0.0329 0.0258 Retention Rate 0.5984 0.5876 0.5770 0.5665 Growth Rate3.20%2.47%1.90%1.46%Table 2: The forecast growth rate of DDM (2016-2019) (Source: As created by the author)
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