\

Assignment

INVESTMENT AND PORTFOLIO MANAGE

SUBMITTED TO:
SIR HASSAN BIN GHAFOOR
SUBMITTED BY:
HAMZA WAHEED
ID# F2018275004

University of Management and Technology

School of Professional Advancement
 EQUITY VALUATION SOLUTION
Question No- 1
PKR' 000 Year 0 Year 1 Year 2 Year 3 PKR' 000 Year 1 Year 2 Year 3
Net Income / (Loss) OR PAT / (LAT) (300) (50) 2,800 PAT/LAT (300) (50) 2,800
Depreciation & Ammortization 165 175 190 Depreciation 165 175 190
Current Assets / CA 150 140 130 125 Decrease / Increase in CA 10 10 5
Current Liabilities / CL 250 235 220 190 Decrease / Increase in CL (15) (15) (30)
Capital Expenditure / CAPEX 100 105 115 130 Decrease / Increase in CAPEX (5) (10) (15)
Borrowings / Loan 750 765 780 800 Decrease / Increase in Loan 15 15 20
Dividend Payout Ratio 65% 65% 65% FCFE (130) 125 2,970
Interest Rate 11% 11% 11% 10% CAPM 17% 17% 17%
Market / Equity Risk Premium- MRP / ERP 5% 5% 5% 6% Terminal Value 21,850
Terminal Growth Rate 3% Discount Factor 0.85 0.73 0.62
Market Return PV of Cashflows (111) 91 15,388
Company Beta 1.2 Sum of PV 15,367
No. of Shares 5,000 Target Price / Share 3.07
Current Share Price in PKR 5 Gain or (loss) in % 38.60%
Total Dividends 1,820
1- Calculate target price / share using FCF and Dividend Discount model. CAPM 17% 17% 17%
2- Calculate gain / loss by assuming if investment made at current price. Terminal Value 13,390
Discount Factor 0.85 0.73 0.62
capm = Rf + B( Rm-Rf) (RM-RF)= MRP or ERP PV of Cashflows 9,430
terminal value = last year CF(1+g)/ last year capm - g Sum of PV 9,430
dicount fector = (1+capm)^-n Target Price / Share 1.88
PV of CF = DF X Free CF Gain or (loss) in % -62.27%
gain or loss % =target price - current share price / current share price
divident yeild = dividend per share / buying price per share
 EQUITY VALUATION SOLUTION
Question No- 2
PKR' 000 Year 0 Year 1 Year 2 Year 3 PKR' 000 Year 1 Year 2 Year 3
Net Income / (Loss) OR PAT / (LAT) (300) 250 1,100 PAT/LAT (300) 250 1,100
Depreciation & Ammortization 135 140 145 Depreciation 135 140 145
Current Assets / CA 120 115 105 95 Decrease / Increase in CA 5 10 10
Current Liabilities / CL 250 265 280 295 Decrease / Increase in CL 15 15 15
Capital Expenditure / CAPEX 100 102 104 106 Decrease / Increase in CAPEX (2) (2) (2)
Borrowings / Loan 765 775 790 810 Decrease / Increase in Loan 10 15 20
Dividend Retention Ratio 30% 30% 30% FCFE (137) 428 1,288
Interest Rate 12% 12% 12% 11% CAPM 18% 18% 18%
Market / Equity Risk Premium- MRP / ERP 7% 7% 7% 8% Terminal Value 10,403
Terminal Growth Rate 5% Discount Factor 0.84 0.72 0.61
Market Return 19% 19% 19% 19% PV of Cashflows (115) 308 7,132
Company Beta 0.9 Sum of PV 7,324
No. of Shares 3,000 Target Price / Share 2.44
Current Share Price in PKR 12 Gain or (loss) in % -79.66%
Total Dividends 175 770
1- Calculate target price / share using FCF and Dividend Discount model. CAPM 18% 18% 18%
2- Calculate gain / loss by assuming if investment made at current price. Terminal Value 6,219
Discount Factor 9.84 0.72 0.61
PV of Cashflows 126 4,254
capm = Rf + B( Rm-Rf) Sum of PV 4,380
terminal value = last year CF(1+g)/ last year capm - g Target Price / Share 1.46
dicount fector = (1+capm)^-n Gain or (loss) in % -87.83%
PV of CF = DF X Free CF
gain or loss % =target price - current share price / current share price