Question 3 - Valuation Concepts - 30 Marks Question (a) 15 marks V. Briefly define and discuss the valuation concepts listed below. As value indicators of a company, which do you think are more relevant (if at all)? 1. A company's Book value / Adjusted Book value / Liquidation value II. Market Capitalisation and Market to Book Ratio III. The Corporate Valuation Model (non-isted entities) EBITDA X PE + value of Non-Operating Assets Interest Bearing Debt, and DCF (including working capital and asset investment investments) + value of Non- Operating Assets Interest Bearing Debt IV. Price Earnings Ratio Market Value Add (MVA) VI. Economic Value AddTM (EVAT) Question (b) 5 marks Calculate and discuss the WACC rate currently being used by your organisation, giving a brief explanation of its composition and logic. Is there any way to improve this rate? Question (C) - 10 marks Perform an EVA calculation on your own organization, commenting on the result. Reflecting on the answer, briefly discuss 5 potential areas which can improve the EVA of the organisation. If you are unable to do this due to the nature of your organization, then you may perform the EVA calculation on any entity listed on the Johannesburg stock exchange in a similar industry to your organization's industry. Please specify the nature of your organization and why you believe that an EVA calculation cannot be done for your organisation. Question 3 - Valuation Concepts - 30 Marks Question (a) 15 marks V. Briefly define and discuss the valuation concepts listed below. As value indicators of a company, which do you think are more relevant (if at all)? 1. A company's Book value / Adjusted Book value / Liquidation value II. Market Capitalisation and Market to Book Ratio III. The Corporate Valuation Model (non-isted entities) EBITDA X PE + value of Non-Operating Assets Interest Bearing Debt, and DCF (including working capital and asset investment investments) + value of Non- Operating Assets Interest Bearing Debt IV. Price Earnings Ratio Market Value Add (MVA) VI. Economic Value AddTM (EVAT) Question (b) 5 marks Calculate and discuss the WACC rate currently being used by your organisation, giving a brief explanation of its composition and logic. Is there any way to improve this rate? Question (C) - 10 marks Perform an EVA calculation on your own organization, commenting on the result. Reflecting on the answer, briefly discuss 5 potential areas which can improve the EVA of the organisation. If you are unable to do this due to the nature of your organization, then you may perform the EVA calculation on any entity listed on the Johannesburg stock exchange in a similar industry to your organization's industry. Please specify the nature of your organization and why you believe that an EVA calculation cannot be done for your organisation
