StudentShare solutions
Triangle menu

Finance and Accounting - Essay Example

Nobody downloaded yet

Extract of sample
Finance and Accounting

‘000 Rustic plc ?‘000 Market value of stocks (3x10)=30000 (1.62x8)=12,960 ROI 4,500, 2,952, Fixed assets 20,000 20,000 Current Assets 7,000 9,000 Current Liabilities -3,000 -5,000 Net assets 24,000 24,000 Long term debt @ 5% 4,000 8,000 Shareholders’ funds 20,000 16,000 Long-term investment 24,000 24,000 126, 000 108,960 Shareholder Value Added approach to estimation of cash flows for the first 5 years with and assumption of growth of dividends in year 6 onwards at an annual rate of 4% in perpetuity. The cost of capital is estimated at 20% Terminal Value = the NOPAT (t + 1) x (1 - g / ROIC) / wacc - g NOPAT: Net Operating Profits after Taxes ROIC: return on the invested capital total present values 7,526 terminal value 14,663 non operating assets value 500 total value of rustic plc 26688 less debt -2800 equity 19888 outstanding shares 3000 value per share 6.63 2. Compare the valuation methods used above Of the models listed above, the most optimal and theoretical approach for stock valuation is dividend valuation approach. 2.1Dividend discount model This model estimates the value of shares at discounted value based on the future dividends payment. It argues that the value of a share is worth the actual present value in terms of all the future dividends that a company will pay. This model is the most effective method for valuation because it places the values of shares on the real cash flows that the investors receive. On the other hand, the dividend discount valuation model is discounted cash flow based on the dividend forecasts over, many stages. Brown & Medoff, (1988), stated that the dividends that have not become ex dividends are not required for forecasting because they have just been announced. The forecast are also based on the detailed financial models running over 2 to 5 year. This model also assumes the constant growth rate. The method is useful when evaluating then value of a company in the short and medium term, however, in long term valuation, it may not be suitable but the management can only use this model if the shareholder agree to accept the assumptions that the dividend payout policies will be maintained for future calculations ( Jensen, &, Ruback, 1983, pp5–50).. The model has limitation that makes it less appropriate. For example, the model has imitations making it difficult to use for short term forecasting as opposed to the long run because the system dividends on the ability to while the order details of host companies have an attitude while most companies use the links because it is not subscribed. Most companies also understand that the models Is dependent on the input data. Finally, the divided discount model is also not preferred by other companies because the model omits cash flows (PWC, 2007, 1-50). 2.2. The shareholder value added approach This is the actual value that a company places on the stakes of accompany. For example, this model is useful for determining worth of a company’s shares or determining whether the investments expenses are justified. SVA model represents all the economic profits ...Show more


Finance and Accounting Name Professor Institution Course Date 1.Dividend valuation model assuming a dividend cover of 2, growth in dividend of 10% per year in perpetuity and assuming a cost of capital of 20% terminology formula Terminal Value FCF ( t + 1 ) / wacc – g t + 1 first year after the forecast period WACC weighted average cost of capital g: growth rate normalized cash flow 45,000 Growth rate expected after the forecast period is 10% WACC 12% total ($ 45,000 x 1.01) / (.12 - .1) = $ 44554 / 0.02 = $ 2227700 It is important to note that the FCF = After Tax Operating Tax Cash Flow - Interest (1 - t ) - PD - RP - RD – E Where: 1…
Author : wieganddiamond
Finance and Accounting Essay essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Finance and Accounting Essay"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Finance and Accounting Essay: Global finance
According to Madura, J. (2003, p. 63) the main feature here is the automatic readjustment of a currency price to the level required in order to equal the supply and demand for the currency. In this way, it clears the market. This creates an automatic equilibrium in the balance of payments; the capital account balance offsets the current account balance.
14 pages (3500 words) Essay
Finance and Accounting Essay: Advanced Financial Accounting
IAS 19 sets out standards related to employee benefits offered by business entities. Its main objective is to prescribe the disclosure requirements and accounting procedures to be followed regarding employee benefits.
12 pages (3000 words) Essay
Finance and Accounting Essay: Personal Finance
This segment of the paper would detail the key facts upon which the strategies for the financial planning for Ms Joan Waterson are based. The Statement of Advice is based on the information that was obtained from Ms Joan Waterson about her. The identification of the current situation of Ms Waterson is crucial because that would determine whether the recommended strategies are appropriate, in the light of her personal situation, needs or objectives.
12 pages (3000 words) Essay
Finance and accounting essay: International Finance
I will get low mark even fail if the report still use those website references. So can you please use book or journal references instead of those highlighted website references below. Thank you so much. Table of Contents Introduction 3 Current Financial Practices of GHC 3 Profitability position 3 Analysis and Measurement of Political and Country Risk 3 Threats, Shortcomings and Inefficiencies 5 Recommendations 5 Recent Development and Opportunities 5 Expectation of Government from GHC 6 Benefits Expected by GHC 6 Accessing Risk Associated With Inward Investment 7 Responsibilities of Chief Accountant and Group Treasurer 10 Conclusion 12 Reference 13 15 Introduction Global Hardwood Corporation
10 pages (2500 words) Essay
GlaxoSmithKline Finance and Accounting Essay
The first part analyzes the Glaxo Smith Kline’s (GSK’s) annual report 2010 in relation to the accounting concepts and process if the Group fulfils the requirements of accounting policies. The financial accounting is the process of preparing and operating accounting information system and disclosing the prepared financial information to the stakeholders of the business.
8 pages (2000 words) Essay
Finance and Accounting Essay
It also assesses and supervises financial organizations for security and reliability. It also embarks on consumer-protection roles, and administers financial institutions in receivership. Insured institutions are required to put indicators at their business premises declaring that their deposits are supported by the full trust and credit of the U.S.
7 pages (1750 words) Essay
Financial statements advice to Sparkle Plc. Finance and Accounting, Essay
Finance and Accounting, Essay. This study aims to advice Sparkle Plc. and its board of directors regarding the information that should be included in the annual report of the company along with the financial statements. Information that is significant and has to be included is termed as compulsory information according to the Company Act of 2006, while voluntary information is those which are important but optional and may be included at the discretion of the company.
11 pages (2750 words) Essay
Finance and Accounting Essay: Procter & Gamble
According to the paper the company wants to design products which will achieve maximum customer delight and conserve natural resources. It wants to win the confidence of the customers and help its leading brands to reach out different countries. It mainly wanted to focus on the core business and become strong global market leaders.
7 pages (1750 words) Essay
Finance and Accounting Essay
Secondly, the fact that the enhanced disclosure is as well not enough and finally, there is the objective of realizing an improvement in the quality and the comparability of the financial reporting. During the analysis of the lessee’s financial position, it is evident that many users tend to want to capitalize operating leases through adjustments made to the reported financial information.
4 pages (1000 words) Essay
Finance and Accounting Essay
As put into words by Lee (1996, p32-37): The earnings that are reflected in a company's financial statements are considered to be the most important evaluator of a company's stock. The companies tend to report enhanced earnings every year so as to assure the shareholders of their performance and profitability.
4 pages (1000 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Contact Us