Capital Valuation Paper
Write a 1,050- to 1,750-word paper in which you justify the current market price of the organization’s debt, if any, and equity, using various capital valuation models. Complete the following in your paper:
• Show calculations that support your findings, including those involving rates of return.
• Defend which valuation model best supports your findings.
Capital Valuation Paper
Capital Valuation Paper
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. Berkshire Hathaway Inc. has a goal to increase its ownership of first-class businesses. Berkshire Hathaway Inc. must determine if the project is worthwhile. One way an organization can determine its worth of a project is by using the valuation process. This process links risk and return to help estimate the worth (Gitman, 2009). According to Investopedia,” market value is often different from book value because the market takes into account future growth potential.” This paper will show 6 different valuation models showing the market price of Berkshire Hathaway Inc.’s debt, if any, and equity. Along with the models this paper will show calculations to support these findings, including those involving rates of return. Finally, Team D will defend which valuation model best supports their findings.
FCF Valuation
Berkshire Hathaway’s free cash flow according to Gitman, 2009 “ represents the amount of cash flow available to meet the operating needs and investments in fixed and net current assets.” Free cash flow (FCF) can be defined as follows:
FCF = OCF-Net fixed asset investment (NFAI) – Net current asset investment (NCAI).
OCF = [EBIT X (1-T)]+Depreciation
Berkshire Hathaway’s OCF = [$15,314,000 x (1 – 0.30)] +
• Show calculations that support your findings, including those involving rates of return.
• Defend which valuation model best supports your findings.
Capital Valuation Paper
Capital Valuation Paper
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. Berkshire Hathaway Inc. has a goal to increase its ownership of first-class businesses. Berkshire Hathaway Inc. must determine if the project is worthwhile. One way an organization can determine its worth of a project is by using the valuation process. This process links risk and return to help estimate the worth (Gitman, 2009). According to Investopedia,” market value is often different from book value because the market takes into account future growth potential.” This paper will show 6 different valuation models showing the market price of Berkshire Hathaway Inc.’s debt, if any, and equity. Along with the models this paper will show calculations to support these findings, including those involving rates of return. Finally, Team D will defend which valuation model best supports their findings.
FCF Valuation
Berkshire Hathaway’s free cash flow according to Gitman, 2009 “ represents the amount of cash flow available to meet the operating needs and investments in fixed and net current assets.” Free cash flow (FCF) can be defined as follows:
FCF = OCF-Net fixed asset investment (NFAI) – Net current asset investment (NCAI).
OCF = [EBIT X (1-T)]+Depreciation
Berkshire Hathaway’s OCF = [$15,314,000 x (1 – 0.30)] +
References: * Gitman, L. (2009). Principles of Managerial Finance (12th ed.). Boston: Pearson, * Addison Wesley * Investopedia. (2012). Retrieved from http://www.investopedia.com/terms/m/marketvalue.asp#axzz1xyOg1xNs * Morningstar, Inc.. (2012). Morning Star. Retrieved from http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=brk.a *