Capital Valuation: Target
Capital Valuation Paper
YOUR NAME
COURSE
Instructor NAME
DATE
Capital Valuation Paper
A business valuation of a company, especially one the size of Target, is a mystery but is often an integral part of planning, decision-making, strategic assessment, and maybe an equitable resolution to a touchy concern. Knowing what a business is worth and placing a value on it builds confidence so undervalue or overvalue of the business does not happen.
Team C will perform a capital valuation of the retail merchandising chain Target. To obtain the answers needed for the valuation, Team C will justify the current market of Target’s debt and equity by using various capital models of valuation. Team C will provide in-depth calculation of the discoveries and include models with rates of return.
Current Market Price of Target’s Debt
Valuation models are used in investment decisions whether it is a decision on which assets are under or overvalued. When in an efficient market, the market price is the best estimate of value. The purpose of the Discounted Cash Flow valuation model is the justification of the value. In the discounted cash flow valuation, the value of an asset is the present value of the expected cash flows on the asset. The information needed to use the discount cash flow valuation is: estimate of the life of the asset, estimate the cash flows during the life of the asset, and estimate the discount rate applied to these cash flows to obtain a present value (Damodaran, n.d.).
In the Cash Flow valuation, the cash flow in period is t, r is the discount rate appropriate given the riskiness of the cash flow, and t is the life of the asset. Target can have two propositions. Proposition 1: is for an asset to have value, the expected cash flows has to be positive over the life of the asset. Proposition 2: the assets generate cash flows early in life will be worth more than assets that generate cash flows later (Damodaran, n.d.).
YOUR NAME
COURSE
Instructor NAME
DATE
Capital Valuation Paper
A business valuation of a company, especially one the size of Target, is a mystery but is often an integral part of planning, decision-making, strategic assessment, and maybe an equitable resolution to a touchy concern. Knowing what a business is worth and placing a value on it builds confidence so undervalue or overvalue of the business does not happen.
Team C will perform a capital valuation of the retail merchandising chain Target. To obtain the answers needed for the valuation, Team C will justify the current market of Target’s debt and equity by using various capital models of valuation. Team C will provide in-depth calculation of the discoveries and include models with rates of return.
Current Market Price of Target’s Debt
Valuation models are used in investment decisions whether it is a decision on which assets are under or overvalued. When in an efficient market, the market price is the best estimate of value. The purpose of the Discounted Cash Flow valuation model is the justification of the value. In the discounted cash flow valuation, the value of an asset is the present value of the expected cash flows on the asset. The information needed to use the discount cash flow valuation is: estimate of the life of the asset, estimate the cash flows during the life of the asset, and estimate the discount rate applied to these cash flows to obtain a present value (Damodaran, n.d.).
In the Cash Flow valuation, the cash flow in period is t, r is the discount rate appropriate given the riskiness of the cash flow, and t is the life of the asset. Target can have two propositions. Proposition 1: is for an asset to have value, the expected cash flows has to be positive over the life of the asset. Proposition 2: the assets generate cash flows early in life will be worth more than assets that generate cash flows later (Damodaran, n.d.).
References: Damodaran, A. (n.d.). Valuation. NYU. Retrieved from http://pages.stern.nyu.edu/~adamodar/pdfiles/country/Portugal.pdf Gitman, L. (2006). Principles of managerial finance (11th ed.). New York, NY: Pearson, Addison Wesley. YCharts. (2010). Target. Retrieved from http://ycharts.com/companies/TGT ----------------------- [pic]