Understanding the value of the incorporeal, what is the value of a multi-sided platform business?
SECTION 1 - Introduction
We are presently observing the reconstitution of financial markets and the emergence of a number of new business models. Theorists such as Damodaran (2009) have asserted that we are presently observing a significant shift from manufacturing to service based economies.This occurrence is said to have given rise firms to an ever increasing number of organisations deriving their worth primarily from incorporeal properties, rather than tangible properties. Technology firms in particular are said to derive much of their value from intangible assets, such as copyrighted properties, patents and human capital.
It becomes evident that many of the approaches taken to value traditional ‘manufacturing' companies (herewith "traditional models") may not be applicable to contemporary information, technology and service based companies (herewith "contemporary models").Many of the metrics and techniques adopted in valuing traditional models may result in spurious conclusions when applied to contemporary models.
Consider several logical issues that hinder the valuation process. The categorisation of expenditures is certainly problematic, with many adopting accounting based approaches that are unhelpful when analyzing contemporary models. Accountants frequently misallocate operating and capital expenses, when firms invest in incorporeal assets. As suchR&D which is a capital expense is frequently treated as an operating expense resulting in inapt profit reporting and capital items values (Damodaran, 2009). Additionally, patents and copyright are particularly pertinent to contemporary business models, but present significant challenges to those seeking to value firms so reliant on such incorporeal properties. Goodwill is also a problematic item to value, given its uncertain nature.Consequently the valuation of a contemporary business model, typified by significant incorporeal properties, is arguably more challenging than the valuation of more traditional business models.
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Complete Question 1 and Question 2 and respond to one of the options (1-12) in Section 3.
SECTION 1 - All groups must answer this question
Question 1. What are the critical challenges associated with valuing a firm with significant intangible assets? Should valuation approaches be adjusted to accommodate the differences? If so what differential approaches should be taken?
Question 1 Explanatory note - Clearly a number of issues abound, please ensure that in your analysis you consider the challenges associated with the valuation of firms heavily reliant on intellectual properties, such as patents and copyright. Consider for example, how a patent portfolio could be valued and the various ways that intellectual properties can be employed.
Question 1 word count: 1000 words
Select one of the following entities; Google, Yahoo, DropBox or Amazon.Briefly, describe the entity's underlying business model. Construct a valuation model to determine the entity's intrinsic value.
Question 2 Explanatory note - Possible approaches for the analysis of the entity's underlying business model include Balanced Scorecard style approaches and SWOT analysis (please note that a number of approaches exist beyond these well-known approaches, that may be employed). Possible approaches to the firm valuation include Discounted Cash Flow Analysis, Dividend Discount Models, Earnings models andRegressive models. Please note that not all the noted entities are trading entities but that does not prevent their valuation. Where earnings data is available it can be included in the chosen valuation model. Where earnings data is not available you can use various estimation approaches to determine the value of the entity. Where quantitative methods are employed in the valuation, an Excel (.xls or .xlsx format) spreadsheet detailing the model, and showing the calculations completed should accompany the report. Remember to clearly articulate your assumptions, and comment on the limitations of your analysis and valuation model.
Question 2 word count: 1500 words
Groups must select one of the following options, and respond
Option 1 - Compare and contrast the performance of the ASX 200 with the LIV EX Index 50or the LIV EX 100. What are some of the different attributes of each asset class? Discuss the relative performance of each asset class.
Option 2 - Analyse the price movements of domestic property markets, focusing on residential property over the last 10 years. Respond to the claim that the market is a speculative asset bubble.
Option 3 - Compare the operating earnings of Google with those of Facebook over the last five years, ending FY 2014/2015. What are the observable trends?
Option 4 - Analyse and discuss the major financial services certifications that are considered pre eminent within the Asia Pacific region. Discuss the suitability of the certifications for finance professionals within the following vocational areas Financial Analyst, Banking,Investment Analysis, Brokerage, Financial Risk Management and Financial Planning.
Option 5 - Analyse the performance of crowdfunding as a policy within New Zealand. Discuss some of the trends (business models, quantum of funds, frequency of fundraising success) for firms raising funds.
Option 6 - Discuss and conjecture the potential of crowdfunding as a policy within India.Discuss some of the trends (business models, quantum of funds, frequency of fundraising success) for firms raising funds.
Option 7 - Analyse the performance of crowdfunding as a policy within the United States.Discuss some of the trends (business models, quantum of funds, frequency of fundraising success) for firms raising funds.
Option 8 - It is frequently the case that commentators refer to the Australian currency as a commodity currency. Consider this statement in light of the association between commodity prices and the AUD/USD pairing.
Option 9 - Self managed superannuation is becoming a popular choice for many Australians wanting to take control of their superannuation. What are some of the key drivers behind this trends. Analyse the data in relation to models of superannuation and
fund choice, and discuss any observable trends.
Option 10 - Consider the role of credit rating agencies such as Standard and Poors and Fitch.Analyse the ratings of the Australian state government securities issuances, what are some of the noticeable recent trends?
Option 11 - Cryptographic currency remains largely unregulated. Consider some of the regulatory responses enacted by nations that have seemed the currency unlawful. What are some of the observable trends in the value of the popular crypto currencies such as Bitcoin and Dogecoin.
Option 12 - Cryptographic currency remains largely unregulated. Discuss how cryptocurrencies function. What are some of the observable trends in the value of the popular cryptocurrencies such as Bitcoin and Dogecoin.
Question 3 word count: 1500 words