Under each of the scenarios below, explain the most appropriate valuation model that should be used to value that particular company (assume all companies are public):

Scenario 1:

Johnstone Co. has had solid earnings over the past 3 years, but due to internal expansion uses all of its earnings to finance capital expansion resulting in negative free cash flows during the 3-year time period.

Model Explanation:

Scenario 2:

Jensen Corp. is a mature company with declining sales and earnings growth as well as capital investment. While the company has paid dividends over the past 3 years, the dividends per share over the past year was very low with a further decline expected in the near term. The company has used much of its positive operating cash flow to repurchase its common stock over this 3-year period.

Model Explanation:

Scenario 3:

Coal Mining International is a small cap company that extrapolates coal as its primary source of revenues. Given its unique production process, earnings and operating cash flows generated by the company are inconsistent due to frequent delays in mining coal and other issues. Commodity prices for coal and its peripheral products are readily available.

Model Explanation:

Scenario 4:

Conway Trucking Co. has generated sales and earnings growth of 25% over each of the past 3 years. To finance this growth, the company has used most of its internal operating cash flow with the issuance of new debt as a secondary source of financing for new capital expenditure and working capital investments. Despite the above, company stockholders have received a slight increase in dividends per share in each of the past 3 years:

Model Explanation: