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Valuation models literature review
Finance & Accounting
Pages 11 (2761 words)
1) Introduction: In today’s fiscal world, it is almost impossible to make money without spending money first. In this context, spending money means either investing money into an existing venture or raising capital in order to start a new business. However, the former holds some precedence because it is common knowledge that investing in existing ventures is safer and more cost-effective than starting a new venture.
This means the valuation method, according to Krishna et al. (2010), “is the process by which forecasts of performance are converted into estimates of price.” There are many types of valuation methods; some of them focus on dividend aspects and while others are to do with ratios in the form of book value, sales, or operating cash flow. Still, other methods look at forecasting cash flow (Krishna et al., 2010). The choice of the valuation model to apply on a firms’ equity is the issue of many recent researches. On this matter, there are theoretical and practical points of view. My dissertation will focus on the financial reports of four different companies: BASF, DOW, SABIC, and Dupont. This will be aided by an economy and industry analysis as well as a ratio analysis for the each of the four firms. Valuation models will then be applied in order to arrive to price of the shares for each of the four firms. This literature review will help to find out the most appropriate valuation models to apply in order to arrive at a reasonable recommendation for investors who are interested in these four companies. ...
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