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Mod IX

Mod IX. Luke Friedman. Industry Definition. Comprised of companies that sell products through “non-store” channels, including catalogs, online sales, television, and radio Products and services are delivered through the mail

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Mod IX

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  1. Mod IX Luke Friedman

  2. Industry Definition • Comprised of companies that sell products through “non-store” channels, including catalogs, online sales, television, and radio • Products and services are delivered through the mail • Companies in this industry typically have low amounts of inventory and commonly act as the “middle-man” in sales transactions

  3. Valuation of equity

  4. Enterprise value vs. equity value • Enterprise • Market Cap + Debt = Enterprise Value • Equity Value • Enterprise Value - Debt = Equity Value

  5. Equity Value Computation

  6. Sensitivity Analysis • Current Enterprise Value: 1,250 • Green=buy>1,250 • Red=sell<1,250 • Not large enough change in g, too large beta, only sensitive to beta, or combination

  7. Equity Valuation Using Residual Income • Computing CI and change in CSE

  8. Equity Valuation Using Residual Income • WACC: 5.5% • EPS Growth:

  9. Equity Valuation Using Residual Income )

  10. Conclusion and Q&A • Issues • Negative EPS growing to positive • Growth rate of Residual Income • Continuing Growth Value • .05% assumed • 1.06% backed into • Equation going from RI to Earnings and Sales • Why Adjusted Assumptions • Sole Survivorwill not perpetually liquidate • Demand for hard-cover books • No analyst sell recommendations • ???

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