Journal Multinational Financial Management -Myassignmenthelp.Com

Question: Discuss About The Journal Multinational Financial Management? Answer: Introduction Financial analysis is the method or a process which is being done in order to evaluate and assess business projects for ascertaining their viability, performance and suitability (Esqueda and Jackson, 2015). The present report deals with the assessment of offers provided by Kohlberg Kravis Roberts Co. to Vocus Group Ltd regarding the purchase of its total issued capital. A detailed assessment of financial statements and other relevant facts and details of Vocus Group Ltd has been done in order to ascertain that whether the offer should be accepted or not. Further, the main emphasis is made on operating, efficiency and performance aspect of the business. The report ends up with an appropriate suggestion regarding the offer price which has been provided in the acquisition approval. Analysis of operational, efficiency and performance aspects of Vocus Group Ltd. Table 1: Assessment of trend of Net Profit and EPS for the year 2011 -2017 (Amount in A $000) Year 2011 2012 2013 2014 2015 2016 2017 Reported NPAT 8115 7775 5098 12925 19850 64252 -1464 EPS Adjusted (cents/share) 14.49 13.28 11.26 16.13 23.16 30.76 -233.49 Percentage of retained profits (5 years) 154.97 565.07 181.67 160.03 69.72 37.69 From above data it can be assessed the Vocus group ltd is having increasing trend in net profit till the year 2016; however the fact has major losses have been incurred in the year 2017 i.e. $1464000 cannot be ignored while evaluating its efficiency (Shapiro, 2008). Similarly, EPS of the company has been increased on a continuing basis from the year 2013 and attained a significant hike from 11.26 cents in the year 2013 to 30.76 in the year 2016. Thus, it can be concluded that except the year 2017; the company is efficiently working and also operating in an appropriate manner (Bodie, 2013). The reason for the significant loss in the year 2017 is a major increase of 386% in operating expenses in comparison to 119% increase in operating revenues. Further, it has been also forecasted earning of the company will reach $300 million until end of the year 2018 and an annual growth in earning of 4%. The specified figures are proof of the efficiency of Vocus Group Ltd. Comparison of Book Value and Market Value of VOC on 30th June 2017 The book value of shares can be specified as the value of the business in accordance with its financial statements. Shareholder equity value; according to this method is ascertained through adding retained earnings to share capital value provided in books of accounts (Petty and et al. 2015). Further the same is divided to total no. of shares in order to ascertain value per share. It is one of the important variants which is assessed by investor as well as company to determine whether the shares and overvalued or undervalued (Farooqi, Harris and Ngo, 2014). Calculation of Book Value Particular Amount in A$000 Sales 1820577 Net Profit After Tax -1464870 Earnings per share (working note 1) (Amount in $) -2.36 Forecasted Earning per share (working note -2) (Amount in $) -.25 (2018) and .26 (2019) Dividend Per Share .06 Forecasted Dividend (working note 3) .063 (2018) and 0.66 (2019) Dividend Growth Rate (Annual) 5% from the year 2018 Book Value (working note 4) 2303063 Working note -1 Calculation of EPS = Total Profit / No. of shares = -1464.87 Million A$ / 619.9819 = -2.36 Working note -2 It has been provided that growth rate of VOC Ltd is 4% thus EPS for future years will be calculated in its accordance Year 2018 = -0.25 A$ Year 2019 = 0.26 A$ Working note -3 As the growth rate of the company is 4% p.a.; thus forecasted dividend will be ascertained through increasing the existing dividend with provided growth rate. The year 2018 .063 A$ The year 2019 .066A$ Working note -4 Calculation of Book Value of VOC Ltd 2089.339 A$ Million / .9072 = 2303063272 A$ Calculation of Market Value Gordon Growth Model Gordon growth model provides the present value of the company as the sum of all future cash flow produced by an organization or entity. However, the model emphasis on the time value and thus due to same reason it is a most appropriate method of ascertaining the market value of any organization (Brigham and Ehrhardt, 2013). In case dividend are provided that value of the stock is equal to the net present value of all future dividends. Thus, in the present case of Vocus Ltd; Gordon growth model has been applied for ascertaining market value. Formula = P = D1 / r-g P = Market price of share D1 = expected dividend for next year. R = Cost of equity G = Growth rate Calculation of Cost of equity Risk free rate + (Market rate of return risk free rate) * beta =2.675 % (9.976 % -2.675%) *.61 = 7.129% Calculation of future dividend Year Dividend 2018 $.0600*1.05 = $0.0630 2019 $0.0630*1.05 =$0.0662 2020 $0.0662*1.05 = $0.0695 Share value in 2020 = Dividend in 2020/ (cost of equity growth rate) =$0.0695/ (7.129% -5%) =$3.26 The same will be discounted further: $3.26/1.07129/1.07129 i.e. 2.84. Present value of dividend of the year 2019 = Dividend of the year /1.07129/1.07129 =.0576 Present value of dividend of the year 2018 = Dividend of the year /1.07129/1.07129 =.0549 Total market value of share on 2017 = Present Value of 2017 + Future income = 2.84 +.0576+ .0549 =$2.96 Thus, from above valuation, we have received the market price per share of VOC ltd i.e. $2.96. Further present value of each share is $3.6 by applying residual earnings of 2016 thus equity value ranges among $2.96-$3.6 an average of the same are $3.28. Current market price of a share is $3.37 so same is overvalued. Conclusion In accordance with the present study; conclusion can be drawn that proposed offer regarding takeover bid is not viable with reference to conducted valuation analysis. It is because; as a net result there will be a loss of $.1 on per share to shareholders. A similar conclusion can be drawn by applying other valuation models as the proposal was not in favour of shareholders. References Bodie, Z., 2013.Investments. McGraw-Hill. Brigham, E.F. and Ehrhardt, M.C., 2013.Financial management: Theory practice. Cengage Learning. Brigham, E.F. and Houston, J.F., 2012.Fundamentals of financial management. Cengage Learning. Esqueda, O.A. and Jackson, D.O., 2015. Journal of Multinational Financial Management. Farooqi, J., Harris, O. and Ngo, T., 2014. Journal of Multinational Financial Management. Petty, J.W., Titman, S., Keown, A.J., Martin, P., Martin, J.D. and Burrow, M., 2015.Financial management: Principles and applications. Pearson Higher Education AU. Shapiro, A.C., 2008.Multinational financial management. John Wiley Sons.