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Module 7: Valuation using the residual enterprise income valuation model

Module 7: Valuation using the residual enterprise income valuation model. International Business Machines Corporation F rank H uang. ESTIMATE THE VALUE OF EQUITY. NFA adjusted for additional footnote information. Original NFA Calculation. FY 2012 Annual Report.

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Module 7: Valuation using the residual enterprise income valuation model

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  1. Module 7:Valuationusingtheresidualenterpriseincomevaluationmodel International Business Machines Corporation Frank Huang

  2. ESTIMATE THE VALUE OF EQUITY NFA adjusted for additional footnote information Original NFA Calculation

  3. FY 2012 Annual Report • NoteD-FinancialInstruments: "The carrying amount of long-term debt is $24,088 million and$22,857 million and the estimated fair value is $27,119 million and $27,383 million at December 31, 2012 and 2011, respectively."

  4. ESTIMATE THE VALUE OF EQUITY

  5. Using analysts’forecasts

  6. Equity Valuation Using Dividend Discount Model assume growth rate=5% beyond horizon

  7. Equity Valuation using Residual Income Model assume growth rate in RI=2% beyond horizon

  8. Sensitivity analysis Recommendation: buy

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