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Mod 8:

Mod 8:. Valuation Using Abnormal Enterprise Income Growth. Lauren Walaszczyk. Quick Background. Headquarter: Tokyo, Japan IFRS Accounting Products (enterprise activities) New/Used Cars Motorcycles Boats Financial Services Brands Acura

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Mod 8:

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  1. Mod 8: Valuation Using Abnormal Enterprise Income Growth Lauren Walaszczyk

  2. Quick Background • Headquarter: Tokyo, Japan • IFRS Accounting • Products (enterprise activities) • New/Used Cars • Motorcycles • Boats • Financial Services • Brands • Acura • America generates the most revenue and manufactures the highest volume of cars

  3. Parsimonious Assumptions • 2014E and 2015E NEA is lower than 2013 • Assumptions are aligned with the industry

  4. Cost of Enterprise Capital • Risk of operations • WACC = [Rd * (Vd/Vent)] + [Req * (Veq/Vent)] • WACC assumption = 9.61% • Bloomberg’s estimated WACC = 8.8%

  5. Discounted Cash Flow • Discount rate of 9.61% (WACC) • Same parsimonious assumptions

  6. Residual Enterprise Income • Discount Rate of 9.61% • Accounting based valuation  NEA is the anchor • Comparing EAPT to expected level of NEA • Negative REI  resources are not being used efficiently or resources are not generating enough profit • i.e. – Honda’s automobiles are not generating profit

  7. Abnormal Enterprise Income Growth • Capitalized EPAT is the anchor • Sales growth rate 2 years after • Compare cumulative cash flow of next year to expected amount of earnings

  8. QUESTIONS?

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