week2 group assignment

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Now you’ll put what you what we learned about value-based management
and residual income into practice. Read over the Valmont Industries,
Inc. case and complete this assignment. Recognize that your residual
income or EVA is a single-period historical measure and does not
definitively tell you what should be done in the future. You want to use
the data in the case to develop your inputs and outline the assumptions
that you are making and describe the calculations employed to develop
your estimates. The basic EVA calculation for Valmont as a whole is
provided in the Valmont Spreadsheet.

You
should present your findings in a report to the CFO not to exceed two
pages (typed, double-spaced, 12-point font, one-inch margins) plus
exhibits. Your report should contain an introduction, a summary of your
analysis, and a conclusion. You will want to use an Excel spreadsheet to
do the analysis for this assignment, but any exhibits should be
produced in MS Word. You should upload only one Word
file containing the text of your report plus exhibits. Use the following
questions to focus your analysis, but your report should not be in
question-and-answer format.

  1. Why do you think Valmont’s stock has “fallen out of
    favor” with Wall Street analysts? Do you think EVA can solve Valmont’s
    stock price problem? Review the spreadsheet provided that computes EVA
    for Valmont and use this analysis to support your answer.
  2. Using the financial data in Exhibit 5, and elsewhere,
    and assuming 10% as the WACC and 35% as the tax rate, compute EVA for
    Valmont’s business segments for the years 1990-1993. Compute for
    Irrigation and for the Industrial Construction and Valmont Electric
    units of the Industrial Products segment. You should also consider the
    EVA of segment competitors to get a sense of industry conditions for
    those segments. What conclusions can you draw? For example, should
    Valmont expand or contract Irrigation? Can you use EVA to help formulate
    the strategic direction of Valmont? Compute invested capital for a year
    as Beginning-of-Year Assets minus Accounts Payable minus Other Accrued
    Liabilities.

Structure your report as a business memo, and use
the questions as a guide of what to cover. Write clearly, using proper
grammar and punctuation.

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