Essay About Terminal Value Assumption3 And Residual Earnings Valuation

Business Valuation Final Project
TABLE 1: Residual Earnings Valuation for Walt DisneyCost of Capital (re)9.69%  Beta1.21  rf2.28%  rm8.40%Terminal Value Assumption3[See page 2 for TV codes]Current Market Price93.90Current Book Value48655Current Shares Outstanding1661Current Dividends3063Current Comprehensive Income8322One-Year Ahead EPS Forecast5.77Two-Years Ahead EPS Forecast6.04Five year EPS Growth Rate10.48%Dividend Payout Ratio36.81%2015 [A]2016 [F]2017 [F]2018 [I]2019 [I]2020 [I]EPS5.776.046.67      7.378.14DPS2.122.222.462.713.00BPS29.2932.9436.7640.9745.6350.77Residual Earnings (RE)2.932.853.1083.403.72Discount Rate (1 + re)t1.0971.2031.3191.4481.588PV of Residual Earnings 2.672.372.362.352.34Total PV of RE: 2016-202012.09Terminal Value57.27PV of Terminal Value36.07Value Per Share77.45TABLE 2: Abnormal Earnings Growth Valuation for Walt DisneyCost of Capital (re)9.69%  Beta1.21  rf2.28%  rm8.40%Terminal Value Assumption2[See page 2 for TV codes]2015 [A]2016 [F]2017 [F]2018 [I]2019 [I]2020 [I]DPS2.122.222.462.713.00EPS5.776.046.677.378.14DPS reinvested (re × DPSt–1).205.215.238.262Cum-dividend earnings6.2456.8857.618.40Normal earnings [(1 + re) × EPSt–1]6.336.637.328.08Abnormal earnings growth (AEG)-.085.255.29       .32Discount Rate (1 + re)t1.0971.2031.3191.448PV of AEG-.077        .212.220.221Total PV of AEG: 2017-2020.576Terminal Value1.667PV of Terminal Value1.152Total earnings to be capitalized7.498Capitalization rate (re).0969Value Per Share77.38TABLE 3: NO GROWTH Residual Earnings Valuation for Walt Disney