Choose a firm listed on the Johannesburg Stock Exchange and determine whether the firms share price accurately reflects the fundamentals of the company. In doing so, you are expected to ascertain the value of the firm, and discuss the risk factors you would have taken into consideration in arriving at the firm value. You are strongly encouraged to forecast your cash flows for a period of 5 years. Your report must follow the format on page 31 of Pinto et al. (i.e. EXHIBIT 1 - 2 A Format for Research Reports)

Hints: i. Use different valuation techniques and compare the values obtained from the respective techniques. You may use:

a. Any three absolute valuation methods (DDM, The Free Cash flow, two stage models, multi stage models, Book Value , Strategic option valuation techniques). Free cash flow methods, DDM and strategic option valuation methods are highly recommended.

b. Any two Relative Valuation Methods (P/E ratios, dividend yield, price-tobook ratios, etc.)

ii. In considering some risk measures, you may use:

a. Probability distributions

b. Sensitivity analysis

c. Likelihood functions

d. Monte Carlo simulation

iii. In estimating risk factors influencing the firm, you may use the following techniques:

a. Regression analysis

b. Decision Tree analysis

iv. Note that this is a quantitative assignment and as such you are expected to quantify all the risk factors used in the valuation techniques.