Business Valuation and Financial Analysis

Business Valuation and Financial Analysis

Forecast future financial performance. Use the four valuation models outlined in class to

produce an estimate of firm value, and compare to stock price. Perform sensitivity analysis

and discuss the results.

  1. Prepare your forecasts and write up the reasons for your forecast assumptions
  2. Prepare your valuations and write up just the $ answers to your 4 models, as well

as include share price on the date of your valuation (the date of your last set of

reformatted financial statements (table 1)

  1. For all of your forecasting and cost of capital assumptions1

, write up your reasons

for your optimistic and pessimistic outcomes (best and worst they ever did in last

5 years perhaps?) and calculate your sensitivity analysis. Only use the AOI model

and Table 2 reports your sensitivity results. Again compare to share price and

discuss your results

  1. Application

Using your sensitivity analysis, and as a potential management consultant to your chosen

firm, provide a discussion as to the possible opportunities for improvement, and potential

challenges for your firm. Provide remedies for these concerns. You should be quite specific

in any recommendations you make.

  1. Your sensitivity testing will show you that your firm will be more sensitive to one of:
  2. sales growth/cost of capital
  3. PM
  4. ATO
  5. Depending on which of the three above is most important to your firm, come up with

some ideas for specific things that your firm can do. For example, if sales growth

matters don’t just say “increase sales”. You need to come up with creative ideas for

your firm to increase sales. You never know, yours may be the next assignment sent

on to your firm!

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