1 / 19

General motors

General motors. Module 8 : Valuation Using Abnormal Enterprise Income Growth. Enterprise operations. General Motors. Client Strategy Template: GM . Strategies.

tamera
Download Presentation

General motors

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. General motors Module 8: Valuation Using Abnormal Enterprise Income Growth

  2. Enterprise operations General Motors

  3. Client Strategy Template: GM Strategies Growth Strategy:Focus on “alternative propulsion strategies” (hybrid, electric, FlexFuel, hydrogen fuel cell) in an attempt to create environmental diversity and fuel efficiency throughout product line Financial Goals & Operating Priorities:Aim to be the industry leader in fuel efficiency, pursue top market share in both domestic and global market Characteristics of the Business Major Business Units: GMNA, GME, GMIO, GMSA, GM Financial Markets: Automotive assembly and manufacturing, financial services (leases, contracts), automotive safety technology Products: Chevrolet, GMC, Buick, Cadillac, OnStar technology, GM Financial services Customers: Auto wholesalers, Rental car agencies, Authorized dealerships Competitors:Toyota, Ford, Nissan Strategic Alliances/Joint Ventures: Mostly concentrated in China Potential Adverse Influences: Constant technology innovation, oil prices, raw material prices, government regulation, dependence on suppliers, product recalls (safety issues)

  4. Markets & products • Auto brands • Chevrolet • GMC • Buick • Cadillac • OnStar (wholly owned sub) • GM Financial • Formerly AmeriCredit Corp • Strategic Alliances • Concentrated in China • JV with SAIC Motor

  5. Parsimonious Forecasting General Motors

  6. Break down RNEA Enterprise Profit Margin (EPM) -Measure of profitability -How much operating profit does the firm earn from each sales dollar? -Used EPM from sales Enterprise Asset Turnover (EAT) -Measure of efficiency -What level of sales does the firm realize from each dollar invested in enterprise assets?

  7. Parsimonious assumptions

  8. Valuation using cash flows • FCF = EPAT - ∆NEA • Discount rate  10% • Enterprise Value = 109,146

  9. Cost of capital & valuation General Motors

  10. Cost of enterprisecapital • rEnt = (rD * VD/VEnt) + (rEq * VEq/VEnt) • Cost of equity = 12.6% • Cost of debt = 1.92% • Calculated WACC = 11.89%

  11. WACC: Bloomberg

  12. Valuing GM • Estimate of Enterprise Cost of Capital = 11.89% • Enterprise Value = 89,194

  13. Residual enterprise income General Motors

  14. REI Model • Assumptions remain the same: • 2.82% sales growth • 4.73% EPM • 5.7 EATO • 11.89% WACC • Enterprise value matches

  15. Abnormal Enterprise Income Growth General Motors

  16. AGR Model • Assumptions remain the same: • 2.82% sales growth • 4.73% EPM • 5.7 EATO • 11.89% WACC • Enterprise value = 89,194

  17. Key Points • Steady State in 2017 • Total to be capitalized is anchored on EPAT • Add PV of AGR • Add PV of continuing value • Enterprise value = total to be capitalized x (1/WACC) • Explains the premium of market value over capitalized EPAT

  18. Checking our figures • Enterprise value remains $89,194 throughout all models

  19. Questions?

More Related