Assignment:
Prepare DFCF Stock Valuation (Discounted Free Cash Flow Stock Valuation) and EVA/MVA Analysis
(Rev. 071216)
Students may elect to use the eVal Financial Forecasting Model or Prof. Stevens' Excel Discounted Free Cash Flow Valuation Model for the DCF Stock Valuation part of this assignment. If the eVal model is selected, make sure that financial information is available for the company that is selected for the assignment (See: https://www.lundholmandandsloan.com). Similarly, if Prof. Stevens' model is used for the assignment make sure that financial information is available (e.g., Yahoo Finance, etc.). (Note: Alternatively, the ValuePro.net model may be used for the DCF valuationbut the final score for the assignment will be reduced by 20% if that alternative is selected.)
The actual Excel forecasting model (either eVal or Prof. Stevens' model) must be submitted with the assignment.
The instructor's EVA/MVA Excel Model must be used for the EVA/MVA analysis. That model must be submitted with the assignment, too.
Assignment: DCF Valuation and EVA/MVA Analysis
Using the company that was selected for the class, there are two parts to this assignment:
1. DCF Company Valuation -
Prepare a DCF Valuation of the selected company using either: (a) the eVal Excel Model and the projections developed in Week 2, or, (b) Professor Stevens' Excel Financial Forecasting Model. Both of the models have an embedded worksheet that accommodates the Discounted Free Cash Flow stock valuation.
Make sure that the stock valuation model is submitted with the written analysis.
Discuss, interpret and explain the assumptions (variables) used in the analysis.
Discuss, interpret and explain the results of the analysis. This involves comparing the intrinsic value of the company's stock valuation to the current stock price and carefully explaining any differences.
2. EVA & MVA Analysis -
Prepare an analysis of EVA and MVA for the selected company. An Excel model is provided by the instructor. Explain the results.
Make sure that the EVA/MVA Excel model is submitted with the written analysis.
CONTENT OF THE ANALYSIS
The analysis associated with the two parts of the assignment needs to include:
1. Explanation of the Variables Used in the DCF Valuation - Explain and justify all of the variables used in the DCF valuation. These would include, but are not limited to, the growth rates, capitalization structure, cost of capital components, WACC, etc.
2. Explanation and Interpretation of DCF Valuation Results - Explain the results of the DCF analysis. This should include an analysis of any difference between the results of the DCF analysis and the current stock price.
3. Explanation of the Data Used for the EVA Analysis and Interpretation of Results - Present the results of the EVA analysis and explain what they mean. The analysis should discuss future EVA results and what variables can affect those results either positively or negatively.
4. Explanation of the Data Used for the MVA Analysis and Interpretation of Results - Present the results of the MVA analysis and explain what they mean. The analysis should explain a discussion of future MVA results and what variables can affect those results either positively or negatively.
Writing Instructions
The discussion portion of the analysis should be three to five pages in length, double spaced, and should employ APA style and format for reference citations. Supporting data (e.g., figures, tables, etc.) and references should be submitted limited to four separate attachments in an appendix after the written portion of the paper.
The paper should begin with a short introduction and then proceed to examine the four topics outlined in the previous section.
The subheadings used in the paper should be:
1. Introduction
2. Explanation of the Variables Used in the DCF Valuation
3. Explanation and Interpretation of DCF Valuation Results
(Including comparison and explanation of differences between the current stock price and results of the DCF valuation.)
4. Explanation of the Data Used for the EVA Analysis and Interpretation of Results
5. Explanation of the Data Used for the MVA Analysis and Interpretation of Results Evaluation: 12.5% of final course grade.