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Nestl é Module 8: Valuation Using the Abnormal Enterprise Income Growth Model

Nestl é Module 8: Valuation Using the Abnormal Enterprise Income Growth Model. Dan Finan. Coffee Production Industry. Overview of Nestle. Six reportable segments: Zone Europe Zone Americas Zone Asia, Oceania and Africa Nestle Waters Nestle Nutrition Other Food and Beverages.

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Nestl é Module 8: Valuation Using the Abnormal Enterprise Income Growth Model

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  1. NestléModule 8: Valuation Using the Abnormal Enterprise Income Growth Model Dan Finan

  2. Coffee Production Industry

  3. Overview of Nestle • Six reportable segments: • Zone Europe • Zone Americas • Zone Asia, Oceania and Africa • Nestle Waters • Nestle Nutrition • Other Food and Beverages

  4. Overview of Nestle • Products are categorized under: • Powdered and Liquid Beverages • Milk Products and Ice cream • Prepared Dishes and Cooking Aids • Confectionery • Pet Care • Water • Pharmaceuticals • Nutrition

  5. Abnormal Enterprise Income Growth Model • The numerator of the last term in equation 8.2, [EPATt+1 + rEnt ∙ FCFt – (1 + rEnt) ∙ EPATt], is referred to as the abnormal enterprise income growth which will be notated as agrt+1.

  6. Abnormal Enterprise Income Growth Model • The accountant’s choice of the method of depreciation does not affect valuation; the underlying economic transactions have not changed and therefore value should be unchanged. • The gain/loss on the sale at the end of the project’s life will take care of any effect caused by excess or too little depreciation.

  7. Rates Utilized for CalculationsCalculated in Module 4

  8. DCF Model using New WACC(Calculated in Module 6, using Adjusted β) Enterprise Value using DCF = $201,940

  9. Residual Enterprise Income Model Enterprise Value using REI = $201,940

  10. Abnormal Enterprise Income Growth Model Enterprise Value using REI = $201,304…

  11. Breakdown Based on Horizon The Abnormal Enterprise Income Growth Model primarily uses forecasts within our designated time horizon to derive total estimated value.

  12. Questions?

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