Laura Martin: Real Options and the Cable Industry Group 13 Adarsh N (60) Gaurav Chand (82) Hemant Kumar (83) Prateek Gupta (99) Rohan Gupta (104) Sahil Jindal (105) Individual Contribution: 16.67% for all group members Strategic Financial Management Prof. K . Sudershan Ques 1. What is the role of Laura Martin? Consider the multiples analysis developed in Exhibits 2‚ 5 & 6. What assumptions does this analysis rely upon? Role: Laura Martin is a sell-side equity analyst at
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Multiples versus DCF analysis Multiples analysis is simple to understand and apply. The inputs for the multiple arepublicly available‚ though are vulnerable to accounting manipulation. Also‚ it isdifficult to obtain a truly comparable large sample of firms. Multiples analysis isbackward-looking‚ reliant on historical/current data to obtain multiples. It reflectsrelative value rather than the intrinsic value which DCF valuation produces.DCF analysis generates an intrinsic value as it relies on data
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Question 1 What are the tradeoffs in using Multiples versus DCF analysis? DCF Valuation 1. Forecast revenue for each year for from the firm’s financial data. 2. Select appropriate discount rate based on WACC 3. Discount each cashflow back to it present value 4. Obtain the terminal value through an application of terminal value multiple 5. You add these values together 6. Using this method‚ Martin calculates the price of Cox’s share to be $54.29 Multiple Valuation: 1. Identify comparable
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Laura Martin case study Question 1- Laura Martin says she gets "paid to talk" - to whom is she talking? Answer: Laura Martin is talking with investors. She would meet with many company representatives including the CEO‚ CFO‚ operating division chiefs and head of investor relations. She is in connections with these investors via telephone‚ fax‚ voice mail or email. It is approximately 900 individual per month. Question 2- Given this crazy web of relationships‚ what are Martin’s incentives
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The purpose of DCF-Valuation is to determine the value of a company in terms of its future cash flows. The cash flows are adjusted with certain items (e.g. those not related to company´s core businesses or those with no cash effect) in order to make sure the flows reflect the actually generated cash as good as possible. This document describes DCF valuation in detail and in our valuation model. If you would like to get an overview of valuation in general or practical examples (numerical and graphical)
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Laura Martin: Real Options and the Cable Industry Introduction Laura Martin‚ an equity research analyst for cable stocks‚ believes that the best way to value cable stocks is through creative methods such as real options and not through more traditional or typical valuation methods such as EBITDA multiples‚ ROIC analysis and DCF analysis. In 1999 she presented at the Credit Suisse First Boston Broadband conference‚ where she wanted to portray the message that real options is a superior valuation
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FINA0065-1 Assignment #1 – Laura Martin: Real Options and the Cable Industry 1. Consider the multiples analysis developed in Exhibits 2‚5 & 6 Please describe the method of ‘Multiples’ using case numbers and answer to the following questions: 1.1. What assumptions does this analysis rely upon? 1.2. How is Martin’s regression analysis different from/similar to traditional multiples analysis? 1.3. Do you agree with her interpretation of the regression analysis? 2. Consider the DCF analysis presented
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the patient reports it her addiction that is making her do it. When the patient uses‚ she feels good for the moment‚ but at the same time she feels horrible because she is aware of the consequences. The patient continue to discuss about her prior DCF case as she still parent through guilt and also being in a hospital for an abscess was an awaken for her for
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Laura Martin: Real Options Valuation in the Cable Industry Case Questions 1. What is the nature of Laura Martin’s job? Define the specific problem that she is addressing. A. Laura Martin is an equity research analyst. This was a unique opportunity to demonstrate her knowledge of the drivers of value in the cable industry. She was going to reveal the value of stocks of cable industry using real options‚ which is a more realistic way of evaluating the value of a project than EBITDA multiples
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Accounting Education: an international journal Vol. 15‚ No. 1‚ 3 –10‚ March 2006 Why DCF Capital Budgeting is Bad for Business and Why Business Schools Should Stop Teaching it RALPH W. ADLER University of Otago‚ New Zealand Introduction As educators‚ we are constantly making decisions about course content. Each year‚ as we begin our preparations for writing our new or updated course outlines‚ such questions as what topics to include‚ modify‚ or exclude‚ are contemplated and re-contemplated
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