Project #34945 - Valuation Assignment

  Assignment

 

·         This is a group assignment. Only one group member should submit the assignment.

·         Submission should include a spreadsheet that shows the model used.

·         Send the document to the Assignment Folder Module 5 Assignment Link.

·         Please write the answers in your own words – do not paraphrase contents from PowerPoint lecture, textbook, and articles or from any outside sources.

·         Please do not share answers with other teams.

·         Each question's grade value is dependent on its degree of difficulty.

 

Assignment Details (100 points)

 

1.      Explain briefly the valuation process for a firm.

 

2.      Your team is to value Delta Oil & Gas Company.  Delta’s free cash flow (FCF) for the next 5 years, from 2015 through 2019, are expected to remain constant at $10 million a year. Delta’s growth rate of sales and free cash flow is expected to be 3% starting 2020. Currently, Delta has 20 million shares of common stock outstanding at a market price of $25 per share. Cost of common equity is 15%. In addition, Delta has 200,000 bonds outstanding at a market price of $1,250 per bond. After-tax cost of the bond is $8%. Using this information, what value will you estimate for Delta?  

 

Your team is expected to prepare a detailed report on the valuation process used.  A one or two line answer on the value of Delta will not get your team any points.  In fact, your answer could be exactly what I have computed, but your team could get no points if the process (including numbers) is not illustrated.  Conversely, your team's answer could be completely off and the team could still get a lot of points if the process is well-explained.  Try and use the spreadsheet that has been uploaded to the Blackboard.

 

I have attached the overview of valuation and valuation example. 

Subject General
Due By (Pacific Time) 07/11/2014 05:00 pm
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