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Mod IX. Luke Friedman. Industry Definition. Comprised of companies that sell products through “non-store” channels, including catalogs, online sales, television, and radio Products and services are delivered through the mail
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Mod IX Luke Friedman
Industry Definition • Comprised of companies that sell products through “non-store” channels, including catalogs, online sales, television, and radio • Products and services are delivered through the mail • Companies in this industry typically have low amounts of inventory and commonly act as the “middle-man” in sales transactions
Enterprise value vs. equity value • Enterprise • Market Cap + Debt = Enterprise Value • Equity Value • Enterprise Value - Debt = Equity Value
Sensitivity Analysis • Current Enterprise Value: 1,250 • Green=buy>1,250 • Red=sell<1,250 • Not large enough change in g, too large beta, only sensitive to beta, or combination
Equity Valuation Using Residual Income • Computing CI and change in CSE
Equity Valuation Using Residual Income • WACC: 5.5% • EPS Growth:
Conclusion and Q&A • Issues • Negative EPS growing to positive • Growth rate of Residual Income • Continuing Growth Value • .05% assumed • 1.06% backed into • Equation going from RI to Earnings and Sales • Why Adjusted Assumptions • Sole Survivorwill not perpetually liquidate • Demand for hard-cover books • No analyst sell recommendations • ???