- This project is designed to apply the valuation techniques we learn in class on companies in the real world.
Step 1: Pick the companies ( I chose Apple and Amazon )
Step 2: Discounted Cashflow Valuation
Value the stock in each company using a discounted cash flow model (You have the discretion to choose the model that you think is most appropriate for that company)
- Estimate how sensitive your value estimates are to changes in your assumptions.
- What are the key drivers of value for your company? (Identify the key assumption or variable that you would focus on in doing your discounted cash flow valuation. Examples would include the growth rate assumption, the growth period assumption, the net capital expenditure assumption …..)
- Present your valuation in a picture, summarizing the assumptions that you have made. (Be as creative as you can in doing this.)
Step 3: Value relative to comparables
- Prepare a list of “comparable” companies, using criteria that you think are appropriate
- Choose a multiple that you will use in comparing firms across the group. (You might have to try a number of multiples out before making this choice)
- Evaluate your company against the comparable firms using the multiple that you have chosen for your valuation.
Step 4: Final Value Estimate and Recommendation
- Consider the values you have obtained from the discounted cash flow, relative, and option valuation models.
- How would you reconcile the different estimates of value?
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