Technical Analysis

Fundamental analysis

1. Determine the intrinsic value of this company using the discounted cash flow

method at the beginning of 2009 (right before floating). [Hint: a table that should

guide you with this computations can be found in excel file data1.xls in the sheet

called Fundamental Analysis]

The intrinsic value is a valuable determinant of the value of company stock. The intrinsic value using the discounted cash flow method takes the cash flows forecasted for a period and discounts them to the present value. In addition to this, the continuing value is calculated and discounted to the present. The continuing value is the value added to the intrinsic value that represents and puts a value on the future growth of the company. The net income of each of the forecasted years was calculated (see Excel 1) and then discounted to the beginning of 2009 at a discount rate equal to the required rate of return, 17%. The continuing value is calculated by taking the net income in 2013 and extrapolating it using the projected growth of 5%. The intrinsic value we calculated was €698.26. As stated before, the intrinsic value can be separated into two parts. The first part is due to the forecasted cash flows which amounts to €277.08, while the second component, amounting to €421.17, is due to the growth projected beyond the forecast figures.

2. What is the P/E ratio of this company in 2009 based only on your estimates?

Interpret it: do you think P/E is high or low, relate it to the growth opportunities

of the company.

3. What is the share price for the company if it decides to issue 30 million shares?

Using the intrinsic value given to the company, we can then calculate the value of the stock being sold. The intrinsic value represents the value of the company due to the two components mention in above. The value of the equity is then calculated by taking 80% of the intrinsic value of the company. This value is then divided by the 30million shares that the...