Sum of parts analysis for Wesfarmers valuation
Added on -2020-07-23
THREE QUESTION INTRODUCTION 1 Question 1 1.1 Sum of parts analysis that help to analyse that combines value of business is grater than value of each individual business. Question 1 1 1.1 Sum of parts analysis that help to analyse that combines value of business is grater than value of each individual business.
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THREEQUESTION
Table of ContentsINTRODUCTION...........................................................................................................................1Question 1........................................................................................................................................11.1 Sum of parts analysis that help to analyse that combines value of business is grater thanvalue of each individual business...........................................................................................11.2 Application of Sum of part analysis with the help of DCF valuation of the Wesfarmers.1.........................................................................................................................................................4Question 2......................................................................................................................................10Question 3......................................................................................................................................103.1 Strengths and weakness of their leadership attributes and style.....................................103.2 Leadership problems have arisen during the period of their leadership.........................12CONCLUSION..............................................................................................................................12
INTRODUCTIONSum of parts analysis is the process of identifying that single unit of the business is moreor less value than the value of whole business. It helps the organisation to find that which unit oftheir business is generating revenue and profit for them and helps to find that their organisationis profitable or not? The report includes the valuation of Sum of parts of the Weffarmes whichstate that their overall value is more than their value of individual portion of business. MichaelAlfred Chancy Ao is being selected as leader for this report, he is the Australian businesses-manand currently he is the Chancellor of the university of the western Australia. He has completedhis advance management program at the Harvard Business school in the year 1922 andcompleted his bachelor degree in the science and master of the Business Administration in 1972.After completing his science degree, he employed in the Petroleum geologist in Australia afterthat he joined Australian industry Development corporation in 1980 and become manager forwestern Australia in 1981. After that he joined Wesfarmers in 1983 and now he is at thechairman post. His growth reflects that, he has diverse skills and ability to gain what so ever hewants. He has given statement to his peers and leaders that broaden your interest and analyse thenon-financial matters more deeply.Question 11.1 Sum of parts analysis that help to analyse that combines value of business is grater thanvalue of each individual business.Sum of parts analysis is the way of valuation of the organisation by determining what aretheir combined division will be have more value than the individual division. It provides therange of value of the company entity by making aggregate the stand-alone value of each itsorganisation units and reaching at single total enterprise value. The value of equity is thenderivable by adjusting the firm's net debt and another non operating assets or expenses (Soshnev,and Allis, 2016). After analysing these factor organisation can able to find that the total value ofthe organisation is grater than or smaller than the value of individual unit of the business.1
1.2 Application of Sum of part analysis with the help of DCF valuation of the Wesfarmers.Table 1: CAPM AssumptionsCAPM AssumptionsK(e)4.84%RFR1.8%Beta0.95Rp5%Table 2: Enterpsire Value (EV)Enterpsire Value (EV)Current Market Price 40 Diluted Shares 1,123 Market Capitalisation 45,178 Long Term Liabilities 5,671 Less: Cash & Cash Equivalents 611 Enterprise Value (in lacks) 50,238 Table 3: Debt Equity WeightageDebt Equity WeightageE/(D+E) @ Enterprise Value88.85%D/(D+E) @ Enterprise Value11.15%Interest Rate (%)8%Tax Rate (@)30%WACC CalculationWACC4.91%Table 4: Income StatementFiscal year ends in June. AUD in millions except per share data2012-062013-062014-062015-062016-06TTMRevenue579365970460181621026551266943Cost of revenue3840639617415434314545525461122
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