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Discounted Cash Flow Valuation: The Graham Number Calculator

Essay Instructions:

use company coco-cola
FINC 440 Instructions & Recommendations for Preparing the Course Assignment

This project is closely aligned with the Course Outcomes and Finance Program Objectives. Completion of this project can be used as part of a portfolio to show potential employers the student is skilled at performing company valuations and financial statement analysis and can be included on the student's resume.
Due t the end of Week 5 - Discounted Cash Flow Valuation:
The purpose of this note is to carefully explain the general expectations and requirements for the Discounted Cash Flow Model Valuation Assignment that is to be prepared for FINC 440. The information and materials presented here are intended to make sure that you clearly understand the general expectations and that there are no misunderstandings about what is to be done and what is expected.

Please review this material so that you are familiar with the specific requirements that are be followed in the preparation and submission of the Assignment.
This Assignment comprises 15% of the final course grade. It will take some time and effort to produce high quality analysis.
1. Using the facilities of ValuePro (http://www(dot)valuepro(dot)net) for the company that you have selected to study conduct a discounted cash flow valuation.
2. The analysis should explain each variable used in the analysis, why you accepted the given input, or how and why you changed a variable.
3. The analysis should also examine the relevant cash flows, compare the final valuation to the stock’s current price and explain any differences. (Note: Remember to adjust the equity risk premium to between 5% and 6%; also, adjust the growth rate to an appropriate long-term growth rate.)

INCLUDE IN THE PRESENTATION AN ANALYSIS OF ALL ASSUMPTIONS IN THE FORMAT THAT APPEARS BELOW.

Submission: Submit to Gradebook and Post a Copy in the Discussion Section of the Online Classroom.

Required Outline & Other Information about the Assignments –

1. Work Hard to Avoid Personal Pronouns – The excessive use of personal pronouns is discouraged in business and analytical writing. It is recommended that personal pronouns are avoided altogether, if possible. Please make sure that personal pronouns (e.g., I, we, my, our, etc.) are avoided in paper. It will take some work, but it can be done easily by rearranging the wording of sentences.
2. Companies Are Not “They,” “Their,” or “Them” – This is a reminder that a company is not a “they,” “their,” or “them.” A company is very much an “it.” So, to reference a company, use “it,” the name of the company, or “the company,” or “the organization,” or “the firm,” etc.
3. Outline for Paper –Students must use the required outline for this assignment. The closer that the paper conforms to the required outline, the better! The outline is presented in the next section.
4. Evaluation Rubric – An evaluation rubric is available for the Assignments. It will be used to evaluate the Assignments. The rubric shows the important components that must be included in the papers. It is a good idea to take a look at the rubric and make sure that each Assignment addresses the requirements. A copy is posted with each Assignment in the online classroom.
5. Subheadings – Each section of the paper must begin with a sub-heading. Please use the sub-headings included in the required outline (presented in the next section).

Here is the Required Outline (It must be used for each Assignment) 

The five class Assignments are intended to be constructive learning experiences. They are designed to show students how to prepare analytical reports in finance using critical thinking, research, and writing skills. The following outline is to be used for each Assignment; these titles are the required subheadings for the sections of the written report:

1. Cover Page - Include a cover page containing the title of the Assignment, the student’s name, the professor’s name, the course title, and the date.
2. Introduction – The Introduction must include:
(a) A review of the Assignment purpose, research methods and the principal information sources, and other information related to the completion of the analysis.
(b) The introduction should also include an overview of the sections of the paper that follow. (1/2 to 1 page)
3. Analysis Section – The body of the report is to address the assigned topics and questions. It is essential that students include appropriate in-text reference citations in APA format:
4. Summary / Conclusion – The summary or conclusion should review the major observations, conclusions and recommendations developed in the analysis. No new material should be introduced in this section. (1/2 to 1 page)
6. References – Provide list of references in APA format.

Essay Sample Content Preview:

Graham Number Calculator
Author
Affiliation
Course
Instructor
Due Date
Graham Number Calculator
Introduction
Benjamin Graham, widely regarded as the "father of value investing," was famous for his ability to identify undervalued companies. Graham is the author of "the intelligent investor" and "security analysis," which are both considered to be among the best-selling books of all time. In a remarkable coincidence, he was also the mentor of Warren Buffett, who is widely considered to be the most successful investor of our time. Buffett is believed to have inherited his value investing principles from Benjamin Graham. The Graham Calculator is a useful tool for determining an approximate value of something's intrinsic worth. It is straightforward and very easy to put into use. Despite the fact that the values it produces are not as precise as those produced by the Discounted CashFlows valuation method, it is still a useful tool for conducting quick analyses.
Analysis
The Graham Number is a metric that is used to assess the health of a company's finances. It is utilised to determine if a firm is overvalued or undervalued in the market. Investors utilise a computation known as the Graham number to evaluate the value of a company's stock. This calculation takes into consideration both the current earnings per share (EPS) and the book value per share of the company's shares. Benjamin Graham proposed the theory that stock was considered undervalued if it was bought and sold at a price lower than the Graham number assigned to it (Vaidya, n.d.). On the other hand, a share of stock is said to be trading at an inflated price if the price at which it is traded is greater than the Graham number assigned to it.
It is vital to keep in mind that an increase in a stock's EPS will result in an increase in the stock's fair value. If a company's earnings per share (EPS) go up, the amount of money it keeps for itself will go up as well, and as a result, shareholders' equity will go up as well. To compute the Graham Number, you need to know the following: The firm's earnings per share (EPS) and its book value per share (BVS).
Using the equation for the Graham number, we know that the price-earnings ratio (PE ratio) needs to be lower than or equal to 15, and the price-to-book ratio (PB ratio) needs to be lower than or equal to 1.5, or it needs to be below these thresho...
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