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MOD 7:. Valuation Using Residual Enterprise Income. Lauren Walaszczyk. Quick Background. Headquarter: Tokyo, Japan IFRS Accounting Products (enterprise activities) New/Used Cars Motorcycles Boats Financial Services Brands Acura

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mod 7

MOD 7:

Valuation Using Residual Enterprise Income

Lauren Walaszczyk

quick background
Quick Background
  • Headquarter: Tokyo, Japan
  • IFRS Accounting
  • Products (enterprise activities)
    • New/Used Cars
    • Motorcycles
    • Boats
    • Financial Services
  • Brands
    • Acura
  • America generates the most revenue and manufactures the highest volume of cars
cost of enterprise capital
Cost of Enterprise Capital
  • Risk of operations
  • WACC = [Rd * (Vd/Vent)] + [Req * (Veq/Vent)]
  • WACC assumption = 9.61%
  • Changed assumption from Mod 6 (8.8%)  Bloomberg turned out to be less reliable
discounted cash flow
Discounted Cash Flow
  • Discount rate of 9.61% (WACC)
  • Same parsimonious assumptions
residual enterprise income
Residual Enterprise Income
  • Discount Rate of 9.61%
  • Accounting based valuation
  • Negative REI  resources are not being used efficiently or resources are not generating enough profit
    • i.e. – Honda’s automobiles are not generating profit
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