Master in Decision Making & Innovation
Now that the assessment process of Financial Information unit has finished and you have your personalized feedback in the Community, it is time to provide you with a general and final feedback that highlights some common mistakes that our expert Egoitz Urrutia has found in your activities and the solution for the three cases: Luko, Harris and Zeltris.
First of all, we would like to congratulate those students who decided to participate in this activity and deliver it on time! You did it!! We all know that you did a huge effort in order to complete this activity and we have taken this aspect into account during the assessment process.
In addition, we are also very happy with the level of participation in the two Webinars that took place during this activity. We hope you could take advantage of them and learn as much as possible.
According to the expert of this unit, Egoitz Urrutia, these have been the most common mistakes:
FIRST CASE STUDY – LUKO
- In order to calculate the FCFs you need to use EBIT (before interests)
- You should have calculated taxes on EBIT
- FREE CASH FLOW Formula: EBIT – Taxes + Amortization – Capex– WC
- Discounting Free Cash Flows: You needed to discount each year and on year 5 discount the Residual Value and the FCF of year 5.
- Enterprise Value: Sum of all discounted FCF and the discounted Residual Value as well.
- WACC= Equity %* Ke + Debt% * Kd *(1-t)
SECOND CASE STUDY – HARRIS
- Price Earnings Ratio (PER): Price / Earnings Per Share
EPS: Earnings/N Shares
2. Price/Cash Flow Ratio: P/CF CF: Earnings + Amortization
3. Ke: Ke= RF+ (RM-RF)*Be or Ke= RF+ Market Premium *Be
Market premium and market rate are not the same thing.
Market premium= RM-RF.
THIRD CASE STUDY – ZELTRIS
- Working Capital: Here we have into account the variation. Current Assets – Current Liabilities
Assets: Cash, Stock, Clients. They are all assets. To have an increase means to have less Cash Flow.
Liabilities: Suppliers. We owe the suppliers more money therefore we have more cash.
2. Pay-out is to be delivered to shareholders from the Profit After Taxes.
Therefore, 45% is a dividend payment and 55% goes to reserves.
Dividend/ N Shares
Moreover, the expert has also prepared the solution for the three cases of this activity in case you would like to take a look and compare them with your answers! Click on the link!
Finally, we would recommend that you take a look at the personalized feedback that you will find in the Community just clicking on the Tutor’s alert and looking for the corresponding notification or going to Financial Information>Activity>page 4 and looking for your name.