Big of Methodology of Innovation

Methodology

Discounted cash flow techniques are used for the project. Various steps are listed below:

Step 1- Thorough Analysis of the Company’s operation

It was necessary to look around into the various sectors in which group is operating. Dlf financials were studied to feature the list of business. Various operations includes construction business, Service and maintenance, Food, Power generation, cinemas operations, insurance and recreational.

Step 2 – Research reports and industry reports

In order to see the long term growth of various business it was necessary to see various research reports of industry published by CRISIL, JP MORGAN and various other institutes. This was used as a road to predict the revenues in coming years thus forecasting future cash flows. Table shows various business growth in coming years as per industry research reports.

Sector | Growth rate | Report used |

Construction business | 9.50% | CRISIL reports on real infrastructure |

Hotel Business | 8.85% | |

Power generation | 9.50% | |

Cinemas | 10% | |

For other business where reports were not able ,regression was used based on historical data.

Step – 3 Assumptions

In order to structure the project in efficient manner and smooth layout of the same, it was necessary to rely on logical assumption as follows :

1. Cost of goods sold and selling, general and administrative expenses in every sector is a function of sales thus calculated on the basis of historical average

2. Gross block and working capital have will increase as per the past. Thus regression will be used using time as a independent variable.

3. Depreciation to share same relationship with the assets thus historical average will be used to predict depreciation for the future.

4. Effective tax rate in the last year is used for the forecasted statements.

5. GDP growth rate of 6 percent is assumed for the company to grow in perpetuity.

6. Cost of debt is based on the bond issue by the...