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Essay / Research Paper Abstract
This 3 page papers examines a case study supplied by the student and uses different methods to determine the value of the firm. The bibliography cites 1 source.
Page Count:
3 pages (~225 words per page)
File: TS14_TEeskpie.rtf
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to be determined. There are several ways this can be undertaken. At the very basic level a company is worth its net assets, however this does not allow for future
revenue streams. A other basic method is that the price to book value ration, this will usually be in the region of 3.5 to 4, meaning that for each
$1 of physical assets owned by the company the share price may be in the region of $3.50 - $4 (Keating, 1997). As the physical assets owned by Eskimo Pie
are 29,518 including cash and working capital. However this is also a short term measure and despite valuing the firm at 103,313 and 118,072, it is unlikely investors will
choose to use this method. The rationale behind this model is that the value of a share should be calculated by reference to
the current value of future dividends. The idea is that the real value is not in the speculation of earnings and the way that the market behaved, that the best
way to measure the value of a stock should be by looking at the money it will produce. This is likely to produce less irrational returns than those that create
the large swings in stock valuations on the stock market (Howells and Bain, 1998). This is therefore a conservative valuing tool. The model is best used when there is a
stock that is making regular dividend payments, but it can be used for other companies; theoretically retained earnings should eventually become dividends (Howells and Bain, 1998). There are two
different models that can be used, here we are using the stable model. For this, we need to calculate the input figures. The first figure is the dividends that are
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