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Module 9: Valuation of Equity

Module 9: Valuation of Equity

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Module 9: Valuation of Equity

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  1. Module 9: Valuation of Equity

    The Ford Motor Company By: Paula Casini
  2. Ford Motor Company Automotive Sector – sale of vehicles, service parts and accessories Ford North America Ford South America Ford Europe Ford Asia Pacific Africa Financial Services Sector Ford Motor Credit Company – vehicle related financing, leasing and insurance Other Financial Services – holding companies and real estate
  3. Products and Services Brand Name Vehicles: Ford and Lincoln Retail Sales Fleet Sales Vehicle Financing Automotive Components Market Share = 14.0%
  4. SWOT Analysis Strengths Weaknesses Strong position in US market ECOnetic initiative Sound financial performance ‘One Ford’ approach Significant growth in China Poor environmental record High cost structure Unprofitable Europe operations Opportunities Threats Positive attitude toward ‘green’ vehicles Increasing fuel prices New emission standards Growth through acquisitions Decreasing fuel prices Rising raw material prices Intense competition Fluctuating exchange rates
  5. Value of Equity
  6. Value Line Forecasts
  7. Implied Forecasts from Value Line Earnings per share growth rate = 17.09% Dividends per share growth rate = 7.43%
  8. Equity Valuation using Dividend Discount Model
  9. Equity Estimate using Residual Income Model
  10. Residual Income Growth
  11. Residual Income Growth
  12. Long-Term Growth in Earnings/Sales 1 + gresidualincome = (CIt+1 – REEQ *CSEt) / (CIt – REEQ * CSEt-1) 1 + gresidualincome = (CIt+1 – 0.1108 * 2.05) / 3.37 CIt+1 = 3.25 1 + gincome = (3.25/3.57) = 0.91036 gincome = -0.0896%
  13. Sensitivity Analysis Value of Enterprise = $59,071 Buy