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Module 5: Valuation Using Cash Flows

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Module 5: Valuation Using Cash Flows

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  1. Module 5: Valuation Using Cash Flows Brian Phelan

  2. Agenda • Assumptions • DCF analysis

  3. Sales Growth Rate • Restructuring • Impaired acquisitions • Layoffs • 5 year plan -> growth by 2015

  4. Industry Sales Growth Rates

  5. Sales Growth Rate • 2014: -5% • 2015 and beyond: 2%

  6. Enterprise Profit Margin from Sales

  7. Industry EPM from Sales

  8. EPM Assumption • Assume: 7.5% • HP Average: 7.82% • IBM Average: 12.14% • MSFT Average: 30.49% • Little variation within each firms annual EPM

  9. Enterprise Asset Turnover

  10. Industry EATO

  11. EATO Assumption • Assume: 3.86 • Average HP EATO • EATO little annual variation for each firm

  12. Assumption Summary • Sales growth rates: • 2014: -5%; 2015 and beyond: 2% • Enterprise profit margin: 7.5% • Enterprise asset turnover: 3.86

  13. DCF Model