Question -
Consider HES Company's financial statements and relevant data given below. Assume the company has a long-term growth rate for 2% after the fifth year and net income and comprehensive income will be identical. Assume HES Company requires one percent of revenue for operating and liquidity purposes. Assume beta for the company is constant from Y+ 1 to +5; ignore capital structure changes.
Required:
1- Construct project Cash Flow Statements using indirect method.
2- Calculate the company's value using Residual Income Model.
3- Calculate the company's value using Free Cash Flow to Equity (FCFE) and Free Cash Flow to Firm (FCFF).
4- Calculate the company's value using Market Multiples, at least three ratios. Analyze and articulate your observation.
5- Analyze and explain pros and cons for the following four methods of valuation:
a- DDM
b- DCF
c- RIM
d- Market multiples
6- Considering the HES valuation, which one of the methods used in this exercise provides a better and more realistic valuation?
Attachment:- Assignment File.rar