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Module 8 : Valuation Using Abnormal Enterprise Income Growth

Module 8 : Valuation Using Abnormal Enterprise Income Growth

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Module 8 : Valuation Using Abnormal Enterprise Income Growth

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  1. Module 8: Valuation Using Abnormal Enterprise Income Growth 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. Discounted Cash Flow

  6. Residual Enterprise Income

  7. Abnormal Enterprise Income Growth Model

  8. Choosing a Valuation Model

  9. Conclusion • REI enterprise value = DCF enterprise value = AGR enterprise value • Sales growth rate is a constant 2.5% • No need to forecast extra years in order to get consistent growth rates between the two models • Abnormal enterprise growth model captures the most value within the forecasted horizon = 66.83% • Value is too high • In the process of updating assumptions based on 2013 10k • WACC needs more investigation • EPAT & EATO assumptions need more investigation

  10. Questions?