Finance Homework
Post 8: Cost of Capital – Determine your Rolls-Royce’s cost of capital. Compare sources of Beta (Bloomberg (BETA), Value Line and Factset) and do a sensitivity analysis of the effect of different betas on the overall WACC. Compare your independent calculations with Bloomberg’s estimates (WACC) and adjust its calculations to reflect the appropriate market risk premium and risk-free rate. Be sure to include the impact of any off-balance sheet financing in the calculation of your firm’s capital structure weights.
Post 9: Free-Cash Flow Valuation – Estimate the value of Rolls -Royce using the McKinsey Free Cash Flow model. Be sure to discuss your key assumptions and sources and justify your growth rates, key inputs (e.g., COGS percent, SG&A percent, CapEx percent, etc.) and your choice of time horizon. Compare your estimates to Bloomberg’s (FA CF).
Post 10: Multiples-based and Alternate Valuation Models – Estimate the value of Rolls-Royce using market multiples, the Residual Operating Income (ROPI) model and the Dividend Discount Model. Be sure to use a consistent source of multiples (Value Line or Bloomberg (FA PRA)).