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FINANCE FINANCIAL MANAGEMENT 6 6 Finance Authors Note: Economic Value Added Analysis: 3 Total Shareholders Return

   

Added on  2020-03-23

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Running Head: FINANCEFinanceName of the Student:Name of the University:Authors Note:

FINANCIAL MANAGEMENT2Table of ContentsEconomic Value Added Analysis:...................................................................................................3Total Shareholders Return...............................................................................................................4Profitability analysis:.......................................................................................................................5Market capitalization analysis:........................................................................................................7Return on investor’s fund:...............................................................................................................7Cash flow analysis:..........................................................................................................................9Net asset value:..............................................................................................................................11Conclusion:....................................................................................................................................11Reference.......................................................................................................................................12

FINANCIAL MANAGEMENT3Economic Value Added Analysis: Economic Value Added analysis, here in after to be referred to as EVA in this document,is the process of ascertaining the value delivered by a firm in excess of the required rate of returnto the shareholders / owners of the firm. Thus, it can defined as the financial process in corporatefinance to calculate the excess amount of return investors have earned on their investment in anorganization. Thus, in order to ascertain the EVA it is essential to have the required rate of returnfor a specific firm (Damodaran 2016). For firms operating in Retail industry in South Africa 6%rate of return on the investors’ funds in such business is considered standard. Thus, In case ofPick N Pay the required rate of return can be assumed as 6% on the amount of capital employedin the business of the company. The calculation of EVA is provided below:Calculation of Economic Value Added Particulars20132014201520162017Operating profit Amount in Zar Million852.001010.001240.001516.001773.00Less:Tax @ 28%238.56282.80347.20424.48496.44Net Operating Profit After Tax (A)613.44727.20892.801091.521276.56WACC (B)9.50%9.50%9.50%11.90%13.10%Invested Capital (C )2526.902823.703261.803897.804079.30D= BXC240.06268.25309.87463.84534.39Economic Value Added (A-D)373.38458.95582.93627.68742.17The EVA is termed as the true economic profit. The figure below indicated trend of theeconomic profit of the company.

FINANCIAL MANAGEMENT4201320142015201620170.00100.00200.00300.00400.00500.00600.00700.00800.00Economic Value Added (A-D)Figure 1: EVA(Source: created by Author)The figure above indicates that the EVA of the company is increasing. This indicates thatthe company is generating value from the funds invested in the business.Total Shareholders ReturnThe total shareholder return is the total return that the investor is making that is dividendplus any gain in capital. The calculation of total shareholder return of the company is providedbelow:Calculation of Total Share holder returnParticulars20132014201520162017Market price of shares45444514528256146969Capital Gain or loss-307683321355Dividend Per Share8492.3118.1149.4176.3

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