Intrinsic Value of Company

Equity Value Estimations of Intrinsic Value of Company

 In step 8, equity value estimations based on multiples conclude that at a certain rate results calculated from two approaches close to each other. Enterprise value related results predict that stock was undervalued. While on the other hand, multiple analysis also concludes that stock was undervalued. Only scenario analysis indicates that stock was overvalued rather than undervalued. Basically, change in these both results is caused by a change in the stock prices, the intrinsic value of firm equity and multiples. Excluding these, other factors such as the total number of shares of stock outstanding are the same over the period of time. Multiple analysis approach is supported by EBIT (Earning before interest and income tax) that can provide a comprehensive overview of the overall income and financial efficiency of the company in operations and handling cost-related factors. Other than shares outstanding, market value or prices of the stock is also the same in the given time duration. Multiple analysis approach has some limitations because of which we can say that the second approach is relatively better for the estimation of stock value. For instance, the negative value of Earning before interest and income tax expense (EBIT) can make multiples unable to provide realistic and reliable results of estimated stock value (Rappaport & Mauboussin, 2003). The multiple equity tables are included in Appendix 2

Suggestion to the Organization

In this case, EBIT is not a negative value. In fact, EBIT is increasing with the passage of time. Therefore, we can predict EBIT as a positive value for the future. Considering this we can say that multiples can provide reliable results of the estimated stock value in this case. Improvement in the capital structure, governance, and dividend policy can cause to increase firm equity value. The regression analysis has been performed to evaluate the relationship between two variables which were Km & Ks. The R square of the model is 0.32 which tell how much the independent variable is impacting the dependent variable the beta is 1.07 which is showing the level of risk. The company can increase equity value by managing dividend dates. No dividend policy and optimal dividend policy can make stock prices and firm equity stable. Corporate governance can increase equity value by minimizing agency costs and cost of capitals. Moreover, capital structure with limited debt can save a company from interest expense. Thus, the company can maximize profit margin.

References of Intrinsic Value of Company

Appendix 1

Appendix 2

Appendix 3