See Guidelines for critical elements needed for company background. Company I have chosen is Tesla. The Business Valuation Report Template should be use for the writing
ACC 345 Milestone One G uidelines and Rubric ACC 345 Milestone One G uidelines and Rubric Overview: This milestone will help you to complete Section I of the final project. You will select the company you will examine and give the rationale for your choice. Prompt: Develop a report about specific public company’s valuation. Provide your audience with relevant context on the selected company, including the purpose of the valuation. Your goal is to set the stage for the analysis to follow. Use the Company List to select a company. Specifically, the following critical elements must be addressed: I. Company Background A. Purpose for valuation B. Date of valuation C. Percent ownership being valued D. Company history and business structure E. Description of facilities, major assets or equipment key to running the business F. Overview of management structure Rubric Guidelines for Submission: Your milestone should be completed using the Introduction Section of the Business Valuation Report template. Sources should be cited according to APA Style. Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value Company Selection Selects a company for analyzing the approach to company valuation Selects a company for analyzing the approach to company valuation, but response contains errors or is illogical Does not select a company for analyzing the approach to company valuation 30 Company Background Provides relevant information regarding the background of the selected company, including links to the financial statements that set the stage for analysis to follow Provides context on the selected company, including links to the financial statements, but information is not relevant for setting the stage for analysis or is inaccurate Does not provide context on the selected company, including links to the financial statements 50 Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas 20 Total 100% https://learn.snhu.edu/d2l/lor/viewer/view.d2l?ou=6606&loIdentId=22985 ACC 345 Milestone One Guidelines and Rubric Rubric ACC 345 Business Valuation Report Template Summary Business Valuation Report of Company ABC, Inc. Company ABC, Inc. Report Date, 20XX Contents INTRODUCTION3 Nature, Background, and History4 Facilities4 Customers4 Management4 Competition4 Strengths and Weaknesses4 Ownership4 Major Shareholder Transactions4 Business Risks4 FINANCIAL ANALYSIS5 Financial Analysis Overview5 Balance Sheets5 Assets5 Liabilities5 Stockholder’s Equity6 Income Statements6 Normalization Adjustments6 ECONOMIC OUTLOOK7 Industry Analysis7 Industry Overview7 Competitive Landscape7 Products, Operations and Technology7 Sales and Marketing7 Finance and Regulation7 Regional and International Issues7 Labor Trends7 General Economic Analysis7 Interest rates7 GDP7 International and Domestic Trade Policy7 Monetary Policy7 Fiscal Policy7 BUSINESS VALUATION8 Valuation Approaches8 Asset Approach8 Income Approach8 Market Approaches8 Selected Method - Income Approach8 Prospective Analysis8 Discount rate9 Valuation calculation10 DISCOUNTS AND PREMIUMS11 Discount for Lack of Control11 Discount for Lack of Marketability11 FINAL CALCULATION OF VALUE12 SOURCES13 INTRODUCTION Description of the Assignment Guidance: Assume the intended use is for the sale of a minority stake of the company you’re valuing. This should be stated in this section of the report. Standard of Value Guidance: Assume the premise of value is that the business is a “going concern” as opposed to liquidation or other premise. Assume the standard of value is fair market value, as opposed to fair value, investment value, liquidation value or some other standard. This should be stated in this section. Company ABC, Inc. Brief History/Overview Guidance: This section should include a general overview of the following: Nature, Background, and History Facilities Customers Management Competition Strengths and Weaknesses Ownership Major Shareholder Transactions Business Risks 4 FINANCIAL ANALYSIS Financial Analysis Overview Guidance: This section should provide a general overview of the balance sheet, the major items present, the company’s capital structure, and any changes over time in these items. A common-size analysis (which is built in to your workbook) will help with this. Ask yourself questions such as, “Has the company taken on additional debt? If so, why?”, or “Does the company have a lot of Intangible Assets? If so, are they at risk for impairment?” Balance Sheets Assets Liabilities Stockholder’s Equity Income Statements Guidance: Similar to the balance sheet write-up, discuss major line items and drivers of those line items. For example, are there increases in Cost of Goods Sold? If so, what are the drivers of those costs? Normalization Adjustments Guidance: Discuss any normalization adjustments you’ve made. Remember, normalization adjustments are changes to the incomes statement (or balance sheet) that smooth out or “normalize” any anomalies that the company may have experienced. An example would be expenses related to a corporate merger or restructuring. This helps you in your prospective analysis by not including any unusual expenses or income. ECONOMIC OUTLOOK Industry Analysis Guidance: Research your industry by reviewing a select group of your company’s peers. By reviewing the annual report of 2-3 competitors you will get an understanding of these items below. You may also search the web for scholarly articles on your chosen industry or recent industry reports. Focus on the suggested items below: Industry Overview Competitive Landscape Products, Operations and Technology Sales and Marketing Finance and Regulation Regional and International Issues Labor Trends General Economic Analysis Guidance: Research the primary economy in which your company operates. Use the U.S. as the default if it’s a global firm, but try to incorporate any important global factors if a majority of its operations is abroad. Focus on the factors suggested below: Interest rates GDP International and Domestic Trade Policy Monetary Policy Fiscal Policy BUSINESS VALUATION Valuation Approaches Guidance: Discuss the major approaches below even though you’ll only be calculating the Income Approach. Explain what they are and how they’re derived. Asset Approach Income Approach Market Approaches Selected Method - Income Approach Guidance: Explain the mechanics of the calculation below. Discuss your selection for the cells in yellow – annual growth rate, and percentage of revenue for Gross Profit and Operating Expenses. Prospective Analysis Discount rate Guidance: Discuss the purpose of the discount rate in the valuation process. You do not have to explain each of these components, but note that they assign risk to different categories of the company. The risk-free rate is what a company would earn on a riskless government security. The equity risk premium is the risk above the risk-free rate one should expect on an equity security. The industry premium is the risk associated with a particular industry (i.e. manufacturing or retail). The specific company risk is a subjective amount applied by the valuation analyst based on his or her perception of the company’s risk. Valuation calculation Guidance: Discuss the mechanics of the calculation below. Provide your reasoning for the amounts chosen for the items in yellow (Depreciation, Capital expenditures, and Debt Reduction). DISCOUNTS AND PREMIUMS Discount for Lack of Control Guidance: You may choose a default discount amount of 15% or if you want to justify a higher or lower amount then you may do so. The following factors below should be considered in this discussion. Explain why each of these factors could only be done by a party with majority control and why a lack thereof could affect the value. Ability to appoint or change management Ability to determine management compensation and perquisites. Able to negotiate and consummate mergers and acquisitions. Can liquidate, dissolve, sell out or recapitalize the company. Able to declare and pay cash dividends. Able to decide what investments to hold and to sell. Block any or all of the above actions. Discount for Lack of Marketability Guidance: Similar to the DLOC, you may choose a default value. Use 25% or if you want you may justify a higher or lower amount. The following factors should be considered because these factors affect a company’s liquidity, which in turn affects its marketability. Suggested factors that should be considered: Company’s Dividend Policy Nature of the Company Company Management Amount of Control to be Transferred Restrictions on Transferability of Stock Holding Period for Stock Company’s Redemption Policy Costs Associated with a Public Offering Note: In practice there is a lot of effort spent on determining these discounts, but due to a lack of free resources and time it is impractical to require that in this course. 12 FINAL CALCULATION OF VALUE Guidance: Summarize the table below and what it is telling the reader. SOURCES The following sources were used to derive the conclusions in this report and the ultimate calculation of value: Current and historical financial statements were obtained for years ended: Industry data from: Economic data from: Other sources: 13 Company ABC Inc. Balance Sheets December 31, 2014 through 2018 2014201520162017201820142015201620172018 Current Assets Cash-$ -$ -$ -$ -$ - %- %- %- %- % Accounts receivable, net- - - - - - - -