Here are the minimal instructions/guidance for your final project for the semester.
- In “Valuation Reference Files” under “Course Documents” pay particular attention to the two Home Depot Files
- Note: The NOA approach to Free Cash Flow to the Firm is used here that we talked about in the last lecture we had. I would like you to use what we have already discussed (i.e. use ‘NOPAT – change in Net PPE (i.e. capital expenditure spending – depreciation) – changes in Net Working Capital for operations’).
- Perform the intrinsic valuation using the FCFF approach leading to the Market Value of Invested Capital to Enterprise Value (MVIC – Cash and Marketable Securities) to Equity Value (Enterprise Value – Long-term Term debt – PV of Operating Leases) to Value per Share (Equity Value / Shares Outstanding)
- Perform a Market Multiple analysis to compare to your intrinsic value. A minimum of two and a maximum of three multiples should be used.
- NOTE: THERE MAY BE SOME CALCULATION ERRORS IN THE SPREADSHEETS THAT ARE USED FOR REFERENCE. I WANT YOU TO USE WHAT WE HAVE LEARNED. THE EARLY 2000s SPREADSHEETS ARE THERE FOR CONTENT AND GUIDANCE RATHER THAN COPYING ALL OF THE FORMULAS, ETC.
- Use the last day of the last fiscal year reporting as the Date of Value (Relying on Shares Outstanding from the 10k)
- In addition to presentable spreadsheets, you are to also provide a written analysis in lieu of presenting. The analysis will include:
- An ExectiveSummary no longer than one-page. Less is more here but it must be able to stand alone and provide a busy top-level decision-maker with a complete briefing, what course of action to follow and a succinct description of why. Use whatever facts are necessary to show the significance and/or priority.
- An Analysis that is 1-3pages listing the key assumptions you make in your analysis, your logic of your argument, and the use of each key assumption. Justify your assumption. Be specific but express your ideas clearly with support, evidence, explanation, and references if appropriate. The analysis portion should “build” to support your opinion/recommendation regarding the market value of Lowes on the last day of the Fiscal Year. Remember, only use information that was known and knowable at the time.
- Include the exhibits to follow the Analysis.
- This should be a professional work product provided as a single document
- In addition to submitting the “professional work product” please submit our valuation spreadsheets as well. Both will be graded.