Nestl é Module 8: Valuation Using the Abnormal Enterprise Income Growth Model

NestléModule 8: Valuation Using the Abnormal Enterprise Income Growth Model Dan Finan

Coffee Production Industry

Overview of Nestle • Six reportable segments: • Zone Europe • Zone Americas • Zone Asia, Oceania and Africa • Nestle Waters • Nestle Nutrition • Other Food and Beverages

Overview of Nestle • Products are categorized under: • Powdered and Liquid Beverages • Milk Products and Ice cream • Prepared Dishes and Cooking Aids • Confectionery • Pet Care • Water • Pharmaceuticals • Nutrition

Abnormal Enterprise Income Growth Model • The numerator of the last term in equation 8.2, [EPATt+1 + rEnt ∙ FCFt – (1 + rEnt) ∙ EPATt], is referred to as the abnormal enterprise income growth which will be notated as agrt+1.

Abnormal Enterprise Income Growth Model • The accountant’s choice of the method of depreciation does not affect valuation; the underlying economic transactions have not changed and therefore value should be unchanged. • The gain/loss on the sale at the end of the project’s life will take care of any effect caused by excess or too little depreciation.

Rates Utilized for CalculationsCalculated in Module 4

DCF Model using New WACC(Calculated in Module 6, using Adjusted β) Enterprise Value using DCF = $201,940

Residual Enterprise Income Model Enterprise Value using REI = $201,940

Abnormal Enterprise Income Growth Model Enterprise Value using REI = $201,304…

Breakdown Based on Horizon The Abnormal Enterprise Income Growth Model primarily uses forecasts within our designated time horizon to derive total estimated value.

Questions?

Nestl é Module 8: Valuation Using the Abnormal Enterprise Income Growth Model