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Homework - Valuations

Homework - Valuations. Se Kim April 8 th , 2014. US GAAP vs. Capitalization. How do you account for R&D expenditures? US GAAP – expense income Capitalize R&D -> amortize the asset over 5 yrs. Find EPAT, NEA, RNEA and REI REI valuation – which method should we use?. US GAAP. RNEA.

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Homework - Valuations

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  1. Homework - Valuations Se Kim April 8th, 2014

  2. US GAAP vs. Capitalization • How do you account for R&D expenditures? • US GAAP – expense income • Capitalize R&D -> amortize the asset over 5 yrs. • Find EPAT, NEA, RNEA and REI • REI valuation – which method should we use?

  3. US GAAP

  4. RNEA • Includes 2020 estimated calculation • Increased by the average of 13’-19’ • 17.86%

  5. REI - Valuation • 2020 REI = 33.34

  6. Capitalization • Did not expense R&D -> included in NEA • Sales growth is 8.33%

  7. RNEA

  8. REI Valuation

  9. Cut expenses by $20M

  10. Considerations • Expense vs. capitalization -> did not get the same ending valuation model • Difference: does it impact I/S or B/S? • R&D capitalization had a much higher valuation

  11. Depreciation – 5 yrs.

  12. Depreciation – 3 yrs. • 2017: $689 vs. $489 -> diff. b/c of methodology

  13. DCF – Valuation (5 yrs.)

  14. DCF – Valuation (3 yrs.) • $5,737 -> both 5 & 3 yrs. • Self-correcting nature of accounting

  15. Questions??

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