Case 3: Valuation

Context: You recently joined Morningstar as an equity research analyst. Your task is to value a firm from the restaurant industry using relative and discounted cash flow valuation techniques. Use your financial projection from Case 2 to value the firm – you are free to change the assumptions you made in Case 2.

You must prepare an Excel file and a 3-4 page Equity Research Update that includes an investment thesis and valuation as in the McDonald’s Morningstar Equity Analyst Report. You do not need to include items other than the investment thesis and valuation but you may include additional items if you choose to do so. Your write up must be 4 pages or less.

For the firm you selected find:

1. The enterprise value

2. The total equity value (market capitalization)

3. The implied share price

You must find each of the above values using each of the 5 approaches covered in class. Note that in approaches where you use a multiple DO NOT simply use the firm’s multiple but rather the multiple of similar firms. The idea is to see if the current multiple applied by the market is accurate.

Ø Create data tables to perform sensitivity analysis on the results from approaches C and D.

Ø Discuss the results under the various scenarios created in Case 2.

Ø Which assumptions are most critical to the analysis?

Ø Summarize your conclusions. Do you think the stock is currently fairly valued in the market?

For EXCEL file, I already did everything. I want report beads on outline