Free Essay

Party Issue Valuations

In: Other Topics

Submitted By saint091
Words 3415
Pages 14
JS
5/1/2013
POLS 3315-001
Party Issue Valuations and Reassessments Why do political parties in the United States abandon or revisit specific issues? Moreover, what is the driving force behind a party making an issue politically salient? Some examples that could be correlated with these questions could be why the Republican Party has stayed silent on issues that many old-guard Democrats feel is contentious in the current administration, why the sudden recent ideological transformation of conservative party, or why many politicians steer clear from Wall-Street related subjects (even though lashing out against bankers these days is sure to garner some attention, and most likely support from the general public). All of these examples and more will be discussed in order to provide a sufficient answer as to why issues are left behind in the dust or put out prominently on display. There are numerous factors and variables to consider when trying answering such a question, one of which could be racial factors. It’s been largely documented that Latinos have been an increasingly growing electorate, going from 1 percent of voters from the 1950s to over 11% in the twenty-first century (Abramowitz 27). With this information in mind, it would make sense that the Democratic establishment is today trying to initiate immigration reform in the United States Senate, knowing that they’ll have an increasing amount of support from their Latino electorate. It should also be noted that although the Democrats harbor a substantial share of the Latino vote, the battle isn’t a lost cause for Republicans, with Bush winning the 2004 Presidency with more than 40% of the Latino vote and one-third of Latino votes in general going to Republicans (Bibby 337-338). It seems the Republicans already know this, and are seemingly trying to capitalize on this with the insertion of Marco Rubio in primetime status. Dr. Alan Abramowitz comments that along with the rise of the nonwhite population, it also brings with it divide and polarization. He notes an example would be the rise of the Tea Party movement, which the American National Election Study showed data that racial resentment helped stimulate the movement (Abramowitz 27). After seeing this movement sprout in 2009-2010, it would make sense why the mainstream Republican Party would transform ideologically to try and harness this opportunity and in turn create a stronger ideological party in the process.
One theme I’ve noticed across the board from scholars on the topic is that many agree that racism still plays a role in elections (Abramowitz 27) and is a growing, newly evolving trend (Henry 254). Dr. P.J. Henry believes in specific types of racism, such as symbolic racism, aversive racism, modern racism, and racial resentment. Symbolic racism described by Henry is a belief system that African-American disadvantages are due to their own fault and a lack of responsibility (Henry 254); this ties with Abromowitz’s thoughts on the shifts of conservative white voters responding with the Tea Party movement whose movement has showed evidence that it was started by the visibility of nonwhites taking control of the Presidency and other forms of government (Abramowitz 32). Moreover, Political Scientist Regina Branton in her research of race in Congressional primary elections found that in areas mostly populated by African Americans or Latinos are more likely to have districts with minority candidates, and also, interestingly, that Democratic primary competition increases in these areas. (Branton 471). It would seem clear the Democratic party sees this trend as an advantage, and is moving with candidates that share the same traits as its constituents in certain districts; it would probably be safe to assume as well the Party in these districts will target issues that are of key importance to Latinos or African-Americans, rather than the country at large. This has some explanation as to why some issues get left behind or abandoned and why some issues re-emerge to the forefront.

Another common theme I’m finding is that most agree that voters on the higher socioeconomic sale or that are more educated and sophisticated are the ones that tend to vote more often (Henry 314, Belanger 551-552) , and these people have stronger ideological views when it comes to the role of government with regards to education, health care, etc. (Abromowitz 33). It’s also been found that that suburban voters have for decades voted for Republicans, with the most loyal being southern suburban voters (Shaw 143-144). Expanding on Dr. Belanger’s study, it was found that citizens of higher sophistication tended to vote less “sociotropically”, or in other words, they view the world more selflessly (Belanger 552); this would seem perfect for the Democratic party to try and cease more sophisticated, educated voters since their view of the role of government is to help, protect, and provide for the less fortunate and argue for higher taxes, which would probably correlate positive results if trying to influence “sophisticated” voters of this model, knowing their traits. For example, you could argue the Democrats have been more aggressive or extreme in recent years with regards to civil liberties issues; it would make sense to remain silent on the issue when asked about it, since explaining it to their selfless/always concerned for others portion of the base might result in a political mishap that costs votes. Although these themes imply why the Republicans and the Democrats target issues the way they do, it’s important to recognize that not all voters vote policy-based, as some of the parties today may assume; as Dr. Benjamin Highton explained in his research with policy voting in the Senate, he describes that there are a variety of factors to consider when asking the question if voters vote by their policy preferences (Highton 196). Some of those factors include the intake of information, motivation, and opportunity, all of which are important variables that the parties should reflect upon before deciding on trying to mobilize voters with policy initiatives. An also related theory I found with regards to parties, issues, and voting in the United States was a study from Dr. Owen G. Abbe. In the study, Abbe researched voter support for candidates and their impact on campaigns. One of the findings was strong evidence that “partisan voters care about issues that are favorably associated with their party” (Abbe 428) and also that leaders must “campaign on party owned issues to have an impact” (Abbe 427-428). An example of not following this model could be Mitt Romney’s infamous comment from the 2012 campaign caught on tape in which he said 47% of country is dependent of the government; at first Romney said the comments were inelegantly stated but were his views, then a few weeks later he said he said he believed his comments were wrong and apologized. If Mitt Romney really does believe what he said in that infamous comment, he might as well have owned up the comment according to Dr. Abbe’s research; in the research, Abbe also says that voters are more likely to support candidates whose campaign “has a well-defined agenda” with regards to issues, and basically feel comfortable with party-owned issues (Abbe 428). Since Romney didn’t exactly own up to his comments, you could make the argument from Abbe’s research that the impact for the “independent individual” argument Romney started later in the campaign lost ground.
With all that being said, it seems to be that there’s plenty of strategic scheming with regards to issue approach. I say this since many political scholars that I’ve listed is in agreement over critical areas, including high political saliency among educated or wealthy citizens, racial factors still playing roles in elections, and also how well candidates are firm in their positions. If parties want to win elections, it’s important that they take into account these important distinctions. So calculated issue revivals based on racial, saliency, and mentality factors are part of the answer to our question. However, are there other factors playing into this role as well? If one were to take an educated guess, could campaign funding be also a part of the answer to the question? Winning primaries is near impossible without a substantial amount of funds. Since candidates always need these funds, does this correlate with issue revivals?
In the beginning of the paper I brought up an example of why would Republicans stay silent on hot-button issues Democrats consider contentious, such as the administration using constant drone warfare or its specific disregards to clear constitutional civil liberties amendments. Another example I mentioned is why some politicians would steer clear away from issues regarding Wall Street. My hypothesis would be that due to the troubles and importance of funding campaigns for general elections and in primaries, it’s a key importance to look after the interests of these campaign contributors than local constituent issues. Reviewing the literature from above would already explain some parts of our question, which is that parties calculate/strategize constituent’s respected ideological mentalities and saliency. Our hypothesis would attempt to explain the rest of our question, which is if campaign funding also has anything to do with issue revival in American Politics.
In order to see if my hypothesis could be correlated with the original question, it would be important to see campaign contributions of a few congressmen. We will analyze a sample of a few congressmen’s voting records and see if they possibly match up with their campaign contributor’s interests.
Firstly, let’s look at some specific congressmen who voted on a specific bill, such as the CISPA bill from a couple of years ago. CISPA, or the Cyber Intelligence Sharing and Protection Act, was a bill that basically allowed internet companies to share information to the United States government about internet activity. The bill caused controversy among various nonprofit advocacy groups such as the ACLU, with its major concerns being the invasion of privacy.
Now, some of the candidates we will sample to analyze who voted on this bill will be a list of 14 Representatives, including Lamar Smith, Eric Cantor, Steny Hoyer, Kevin McCarthy, Mark Amodei, Paul Ryan, Charles Rangel, Pete King, Carolyn Maloney, Bruce Baley, John Lewis, Alan Grayson, John Larson, and Keith Ellison. To see if we can draw up some correlations, it will be important to match up their voting records on a recent issue with their interests of their major sources on campaign contributions.

**All Data Provided From opensecrets.org, gov.track.us., and digitaltrends.com Smith | Express Scripts, Comcast Corp, TimeWarner, USAA, Ernst & Young, Dell, Deloitte, Honeywell International, KPMG LLP, Microsoft, Norfolk, Wal-Mart, CSX | Cantor | Comcast Corp, Wells Fargo, Travelers Companies, DaVita, New York Life Insurance, Dominion Resources, McGuireWoods, Goldman Sachs, Genworth, Bank of America, Citigroup, Merck & Co., Northrop Grumman | McCarthy | Oracle, Chevron, Comcast, Goldman Sachs, Bechtel Group, Google, Northrop Grumman, Express Scripts, Edison International, Eli Lilly & Co | Hoyer | AT&T Inc, Citigroup, USAA, Verizon, Northrop Grumman, Time Warner Cable, Comcast, Exelon, Goldman Sachs, Ernst & Young | Ryan | AT&T Inc, Unitedhealth Group, Abbott, Wells Fargo, Goldman Sachs, PricewaterhouseCoopers LLP, JPMorgan Chase, Lockheed Martin, Deere & Co. | Amodei | AT&T Inc | Rangel | Cablevision Systems | King | Boeing, Deloitte, Cablevision, Northrop Grumman, Raytheon, Fed Ex, Honeywell | Maloney | Reed Elsevier Inc, Deloitte, KPMG, New York Life Insurance, Ernst & Young, Asurion | Baley | Honeywell Int. | Lewis | Comcast, Coca-Cola, Boeing, CSX, Honeywell | Grayson | Wyndham Worldwide | Larson | United Technologies, Boeing, Lockheed Martin, New York Life Insurance, Goodrich, Travelers Companies, PricewaterhouseCoopers, Wal-Mart Stores, McKesson Corp., Pfizer | Ellison | General Mills, Honeywell, New York Life Insurance | Smith (Y) | $157,363.00 | Amodei (Y) | $14,000.00 | Lewis (N) | $60,000.00 | Cantor (Y) | $458,150.00 | Rangel (Y) | $10,000.00 | Grayson (N) | $10,000.00 | McCarthy (Y) | $401,750.00 | King (Y) | $81,200.00 | Larson (N) | $126,200.00 | Hoyer (Y) | $223,400.00 | Maloney (N) | $64,500.00 | Ellison (N) | $32,200.00 | Ryan (Y) | $115,570.00 | Baley (N) | $10,000.00 | | | | |
The charts and graphs above show many things. The data shows a sample size of seven “YEA’s” and six “NAY’s”. The middle chart from the data from digitaltrends shows the companies that have given their direct or indirect support in the CISPA bill (indirect support meaning through support of a trading group). The companies in bold have voiced their direct support of the bill. The bar graph above it shows the total amount of capital contributed by these companies to the respected congressmen. The total amount of capital contributed for those voting YEA in support from the bill vastly outweighs those who voted for NAY in disapproval of the bill. The total difference in capital from the bill’s supporters to detractors is a substantial $1,158,533.00. The average amount of capital spent for YEA support is $182,679.13 and the average for NAY votes is $50,483.33.

From the sample chart, you can possibly make the inference that X amount of capital translates to a YEA vote, or, in other words, X amount capital translates to Y support for an issue. This is important to our original question, since it shows that not only do constituents mentality and other mentioned factors play into issue restoration and lessening’s, but also that other campaign contributory factors correlate with it as well. This can also be used to answer why some congressmen back off or stay away from certain issues; suppose we have candidate X and X’s major campaign funder, company Z. Z has publicly stated its support for bill Y that is to be voted on in the next weeks. X’s constituents may disapprove of the bill, but X’s major campaign contributor feels another way. Opposing Z’s viewpoints may cost X campaign funding may cost him much need capital to win the next primary election. Hence, it would make sense for X to go with support of an issue; it would most likely hurt X politically more if the opposing candidate outspent him.
Also, these graphs could also explain other relations; for example, if company Z were to support congressmen X in hopes of revival of an issue that hasn’t been politically salient in years. Some examples of this in the modern era could be why no one congressionally has really moved on the issue of prominent bankers getting off with a pass, even with regards to large amounts of evidence and reports that there has been systematic abuse of the financial system. Why haven’t many Congressmen brought this issue up for revival? By studying our graphs and analysis, it shows that many of the banks who were involved, or implicated, in the abuse are also major campaign contributors, such as JPMorgan Chase, Goldman Sachs, and most notoriously Bank of America. Even though going after these larger banks may seem like a good idea, since most of the public view the banks today the way most Americans view Piers Morgan, it doesn’t necessarily translate to bringing up the issue to the forefront, since these banks have many hands in play with regards congressionally backed topics. Concluding this analysis, issues are revived and abandoned for many aspects, including the status of constituents, their underlying tensions including specific issues that engage them or even racial factors. The hypothesis conducted that since many scholars and scientists agree with this notion, could the possible campaign funding factor be correlated into answering this question as well? After finalizing results, and after seeing the correlation of the substantial amount of average capital spent by companies in support by congressional support, it would make be clear that issues are abandoned or revived also by congressmen’s lobbied interests backing them as well. These huge corporations, banks, and other lobbying conglomerates can play huge factors in elections, from having issues being in dead water to later being discussed nationally among congressional leaders. Some of what it takes to get issues undertaken, revived, or expanded upon are large start-up movements including the Tea Party or Occupy Wall Street, but another factor that cannot be looked over is the amount of capital spent in support of an issue. If one wanted to further investigate into this, I would suggest looking into the studies of political expenditures from the likes of Goldman Sachs and JPMorgan Chase. After reading into many documents concerning funding of campaigns, I came across their names among the top contributors and many prominent Congressmen. It would be interesting to see how many bills these larger banks of the western world have had their fingerprints on. One example I would mention also with the revival of certain issues would be the gun control debate. Gun control hasn’t been a politically salient issue in years, probably since the 1990s with the LA riots. However, since the incidents at Aurora, Colorado, Newtown, and Tucson, it has been brought back by the current administration at full force. It would make sense that the issue would be revived again since these national days of horror keep happening once a year, and that maybe the White House recognizes constituents want something to be done. However, it has always been known that gun violence in America is and has been a major epidemic when compared to the other developed countries. So since the statistics of gun violence were out there long before the incidents, why the revivals of the gun control issue now? This goes to show that sometimes, not even the most well-known problematic, statistical happening can cause political salience among voters. It took major incidents across the board for issues to be brought back up again. I would also argue that as well as voter mentalities, ideologies, and campaign funding’s, I would recommend further investigation of the role of television and news networks with regards to issue resurgence or salience. For an example, I would mention the 60 Minutes piece from a couple of years ago that put an issue on the forefront, which was that congressmen were being allowed to basically trade stock on information they learn during confidential briefings not available to the public. Afterwards, constituents and subsequently the press were adamant about their questions on why this was being allowed in the first place. Hence, discussions in Washington were held on how to settle this newly revived or unknown issue, which later became known as the STOCK Act, which would prohibit this type of behavior. However, as discussed earlier, it would probably only be a matter of time before the larger banks put their fingerprints on this to make their voices known, whether it is through verbal communication or contributory capital.
So now, we have discussed why all the important factors as to why issues make their mark in American saliency. We have discussed ideological factors, mentality, and status factors. One of the bigger issue forefront bringer, however, as hypothesized, is monetary factors. After conducting sampled analysis and results, it shows that support for issues does correlated well with the amount of capital contributed. Many people believe money speaks volumes in Washington, and this in case of politically salient issues, they certainly have a case.
References
Highton, Benjamin. 2004. “Policy Voting in Senate Elections: The Case of Abortion”. Political Behavior , Vol. 26, No. 2 (Jun., 2004), pp. 181-200
Owen G. Abbe, Jay Goodliffe, Paul S. Herrnson and Kelly D. Patterson. “Agenda Setting in Congressional Elections: The Impact of Issues and Campaigns on Voting Behavior”. Political Research Quarterly , Vol. 56, No. 4 (Dec., 2003), pp. 419-430.
Daron R. Shaw and Seth C. McKee. 2003. “Suburban Voting in Presidential Elections”. Presidential Studies Quarterly , Vol. 33, No. 1, 2000 Presidential Election (Mar., 2003), pp. 125-144
Branton, Regina. “The Importance of Race and Ethnicity in Congressional Primary Elections”. Political Research Quarterly , Vol. 62, No. 3 (Sep., 2009), pp. 459-473. P. J. Henry and David O. Sears. 2002. “The Symbolic Racism 2000 Scale”. Political Psychology, Vol. 23, No. 2 (Jun., 2002), pp. 253-283.
Jean-François Godbout and Éric Bélanger. 2007. “Economic Voting and Political Sophistication in the United States: A Reassessment”. Political Research Quarterly, Vol. 60, No. 3 (Sep., 2007), pp. 541-554.
Abramowitz, Alan. 2013. The Polarized Public? Emory University. New Jersey. Pearson.
Bibby, John F. 2003. Politics, Parties, and Elections in America. 5th ed. Belmont, California. Wadsworth-Thompson.
Couts, Andrew. 2012. “CISPA SUPPORTERS LIST” Digital Trends. http://www.digitaltrends.com/web/cispa-supporters-list-800-companies-that-could-help-uncle-sam-snag-your-data/
Opensecrets.org
Govtrack.us…...

Similar Documents

Premium Essay

Ipo Valuation

...|IPO Valuation Procedure in Bangladesh | | | | | | | Internship Report IPO Valuation Procedure in Bangladesh Prepared for: Professor Shakil Huda Chairman IBA Career Center Institute of Business Administration University of Dhaka Supervised by: MsSyedaMahrufa Bashar Lecturer Institute of Business Administration University of Dhaka Prepared by: Asif Rezwan Roll: 64, MBA 44D and Management Trainee Officer, LankaBangla Investments Limited Institute of Business Administration University of Dhaka June 24, 2012 June 24, 2012 MS. Kanij Fahmida Assistant Professor Department of Accounting Faculty of Business Studies Bangladesh University of Business & Technology(BUBT) Dear Sir, Subject: Letter of Transmittal for Internship Report I, Ibna Shina Shibly, am submitting my internship report on “IPO Valuation Procedure in Bangladesh”. The internship period and the subsequent effort in writing this...

Words: 7525 - Pages: 31

Premium Essay

Valuation

...AMITY INTERNATIONAL BUSINESS SCHOOL ANALYSIS AND VALUATION OF EQUITY SECURITIES OF TATA CONSULTANCY SERVICES , INFOSYS AND WIPRO LTD. SUBMITTED TO: SUBMITTED BY : Ms.Vibha Singh Atreya Vyas A1802011445 Section C MBA IB TABLE OF CONTENTS S.No | Topic | Page Number | 1 | Introduction | 3 | 2 | Research Methodolgy | 4 | 2.1 | Research Objectives | 5 | 2.2 | Proposed Literature Review and Tentative Hypothesis | 5 | 3 | Data Collection | 7 | 4 | About Companies and Research | 8 | 5 | Limitation of Study | 11 | 6 | References | 12 | 1) INTRODUCTION In today’s era every company needs cash or cash equivalents to run its day to day activities smoothly. The major sources through which companies can borrow money are: * Bank Loans * Debenture * Preference Share * Equity Share. Bank Loan is the amount which companies receive after fulfilling all the required information which is mandate according to the rules of banks. Companies need to mortgage its assets as guarantee for the future repayment of its loan amt. on the loan bank charge interest which company has to pay irrespective of the fact that company is in profit or loss. Debentures are the instruments which are used to acknowledge the receipt of the debt form the debenture holders. Debenture Holders are sought lenders for the company. They...

Words: 4106 - Pages: 17

Premium Essay

Valuation

...Bank Valuation: Comparable Public Companies & Precedent Transactions Picking a set of comparable companies or precedent transactions for a bank is very similar to what you’d do for any other company – here are the differences: 1. The set has to be more specific due to differing regulatory requirements for different countries and types of banks. For example, if you’re looking at large-cap commercial banks in the US, you should not include regional banks or insurance companies even if they’re also large-cap – nor should you include Credit Suisse or Deutsche Bank, because they’re not US-based. 2. Rather than cutting the set by revenue or EBITDA, you use metrics like total assets or total deposits to determine the “size” of banks. 3. Instead of traditional metrics like revenue and EBITDA, you list the metrics and multiples that are relevant to a bank: EPS, Return on Equity (ROE), Book Value (BV), P / E, P / BV, and so on. Operating Metric Equity Value Book Value (BV) How to Calculate It Shares Outstanding * Share Price Shareholders’ Equity(1) What It Means How much are we worth? How much are we worth according to our assets rather than the market? How much are we worth to everyone except preferred shareholders? How much are we worth according to our incomeproducing assets? How much money do we make after taxes? How much money is left to pass on to common shareholders? How much in dividends could we potentially issue to each common shareholder? Does our market cap overvalue or......

Words: 1938 - Pages: 8

Premium Essay

Valuation

...Valuation Valuation is the process and procedures used to determine the current worth of a company. Valuation is used in deciding if a company is worth investing in , what price you should pay when buying a company and even financial and dividend choices when running a company . Some elements of a valuation are Economic conditions, financial analysis, and financial statements. When a financial analysts need to value a business, they often start by identifying a sample of similar firms. (Brealey, Myers, & Marcus, 2012). They then examine how much investors in these companies are prepared to pay for each dollar of assets or earnings. (Brealey, Myers, & Marcus, 2012). Valuation determines a company’s value by using internal and external factors whereas when determining a company’s value and using financial income statement it uses internal factors only. Valuation also is a company’s market value and income statement is the book value. The definition of a stakeholder is a person, group, organization, or system that affects or can be affected by an organization's actions. The main stakeholders of a company are the employees, suppliers, investors, and customers. The Executives major goal is to create the most value for all stakeholders. This is a difficult goal. Executives know that long term value is what is best for their stakeholders especially with the economy the way it is today. However, corporate leaders are under great......

Words: 363 - Pages: 2

Premium Essay

Company Valuation

...Running Head: COMPANY VALUATION Company Valuation [Name of writer] [Name of institute] Company Valuation Introduction This is the case of a partnership business, Midwest Lightning Inc. (MLI) partnered between two entrepreneurs Jack Peterson and David Scott. Over the years these two partners have developed differences, which have escalated to the point of separation. Hence, in this assignment we are going to provide solution that would be required as the partnership culminates. Overview of the case The partners of the company Midwest Lightning have over the years developed differences and they are now at complete 180 degrees when it comes to their views about the business. The solution that has been suggested is that the partnership should end as the differences have become irreconcilable. In the course of separation, various issues have now arisen, regarding the valuation of the company and how much worth each partner should be accrued in the event of separation. 1) Evaluation of the company-Buy and Sell bids Allen Burke, the accountant of Jack Peterson and David Scott suggested a bid agreement. The agreement finalised was that both owners had agreed on the signing of a mutual buyout agreement. The agreement mentioned that the owners were to submit a secret bid in relation to what the other owner’s half of the business should be. The partner that would offer the maximum price would then buy out the share of other partner. A......

Words: 1504 - Pages: 7

Premium Essay

Valuation

...strategy is to provide customers with everyday low prices. It is known for its discount stores. Wal-Mart’s competitors are Sears, Target, Gap, limited, Dillard’s, Macy’s and JC Penny. The major membership only warehouse competitor is Costco Wholsale. Wal-Mart became a publicly traded firm in 1970 with an initial stock price of $16.50 per share and subsequently, in March 1974, declared its first cash dividend of $0.05 per share (after two two-for-one stock splits). It had undergone 11 two-for-one stock splits, and thus, an original lot of 100 Wal-Mart shares had grown to 204,800 shares after the most recent split in April 1999. For this valuation we will be using the dividend discount model, the capital asset pricing model (CAPM) and price/earnings multiples. Dividend Discount Model (DDM) In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor. [pic] I. Dividends in Perpetuity The current stock price of Wal-Mart using this method is the present value of all expected future dividends, discounted at an investor’s required rate of return. A share is valued by forecasting futures dividends of Wal-Mart. • Constant growth dividend discount model. According to the constant growth DDM, the current value of a firm’s......

Words: 1158 - Pages: 5

Premium Essay

Valuations

...Valuation Assumptions The models used to value the target firm SkyWest will include: I. Residual Earnings Model (REM) II. Abnormal Growth Model (AGM) III. Dividend Discount Model ((DDM) IV. Discounted Cash Flow Model (DCF) V. Method of Comparables These models have been based on some fundamental assumptions. These assumptions can be found in Appendix 1.1. I. Residual Earning Model The REM splits the intrinsic value of a company into two components; the book value and the present value of the future residual earnings. The discount rate used for future earning was the Cost of Equity found in Appendix 1.1. Through obtaining the earnings per share (EPS), book value per share (BPS) and dividends per share (DPS) from Bloomberg, it is possible to estimate the value of SkyWest. A growth rate of 2.6% (2012 financial statement) was applied. The value per a share shown in Appendix 1.2 is approximately 94 cents. II. Abnormal Growth Model The RE model anchors book value whereas, the AEG model anchors earnings. In applying the model the value per a share is equal to the capitalised earning plus the extra forecasted earning and applying a growth rate of 2.6% for the CV. In Appendix 1.3 the value per a share is $9.86. However, there seems to be a problem with the CV, through excluding the CV the value per a share is equal to approximately 33cents (0.02076/0.0636). Theoretically, the AEG and RE models should give the same valuations, but due to imperfections, the two......

Words: 499 - Pages: 2

Premium Essay

Valuation

...VALUATION TECHNIQUES Vault Guide to Finance Interviews Valuation Techniques How Much is it Worth? Imagine yourself as the CEO of a publicly traded company that makes widgets. You’ve had a highly successful business so far and want to sell the company to anyone interested in buying it. How do you know how much to sell it for? Likewise, consider the Bank of America acquisition of Fleet. How did B of A decide how much it should pay to buy Fleet? For starters, you should understand that the value of a company is equal to the value of its assets, and that Value of Assets = Debt + Equity or Assets = D + E If I buy a company, I buy its stock (equity) and assume its debt (bonds and loans). Buying a company’s equity means that I actually gain ownership of the company – if I buy 50 percent of a company’s equity, I own 50 percent of the company. Assuming a company’s debt means that I promise to pay the company’s lenders the amount owed by the previous owner. The value of debt is easy to calculate: the market value of debt is equal to the book value of debt. (Unless the debt trades and thus has a real “market value.” This information, however, is hard to come by, so it is safe to use the book value.) Figuring out the market value of equity is trickier, and that’s where valuation techniques come into play. The four most commonly used techniques are: 1. 2. 3. 4. Discounted cash flow (DCF) analysis Multiples method Market valuation Comparable transactions method Generally, before...

Words: 11224 - Pages: 45

Premium Essay

Valuation

...BUSINESS VALUATION METHODS (All Valuations MUST BE based on Historical Data) I. Adjusted Book Value Take the Book Value of net worth -assets not acquired +liabilities not assumed +fair market value of assets acquired +any net worth adjustments =Adjusted Book Value ____________________________________________________________ II. Capitalized Adjusted Earnings First Step: Adjust Historical Earnings Seller’s Discretionary Cash Flow Net Profit +Officer’s salary +Discretionary expenses -New Owner salary Adjusted Profit Last Year 50.0 +70.0 +30.0 -60.0 90.0 Second Step: Get the adjusted profits for 5 years then do a Weighted Average of the Adjusting Earnings Year 95 96 97 98 99 Totals Average Earnings $ 50 $ 30 $ 70 $ 60 $ 90 Weight 1 2 3 4 5 15 $ Adjusted $ 50 $ 60 $ 210 $ 240 $ 450 $1,010 /15 67 (rounded) Third Step: Calculate a Discount Rate Determine T-Bill Rate Determine Offset Risk Rate √ √ Establish rate of return based on risk factors Establish rate of return based on general economy 5.0% 12.0% Determine Offset Illiquidity Rate Total the Rates 3.0% 20.0% Fourth Step: Take the weighted average of the adjusted earnings and divide by the discount rate. Example: $67/.20 = $335 ___________________________________________________________________ III. Discounted Future Earnings First Step: Adjust Historical Earnings Last Year 50.0 +70.0 +30.0 -60.0 90.0 Net Profit +Officer’s salary +Discretionary expenses -New Owner salary Adjusted Profit Second Step: Get the adjusted......

Words: 1274 - Pages: 6

Premium Essay

Valuation and Verification

...* VERIFICATION AND VALUATION OF ASSETS AND LIABILITIES Spicer and Pegler have defined verification as “it implies an inquiry into the value, ownership and title, existence and possession and the presence of any charge on the assets”. Thus, verification includes verifying :- * The existence of the assets * Legal ownership and possession of the assets * Ascertaining that the asset is free from any charge, and * Correct valuation * auditor’s object According to the `statement of auditing practices’ issued by ICAI, “the auditor’s object in regard to assets generally is to satisfy that :- * They exist. * They belong to the client. * They are in the possession of the client or the persons authorized by him. * auditor’s object * They are not subject to undisclosed encumbrances or lien. * They are stated in the balance sheet at proper amounts in accordance with sound accounting principles, and * They are recorded in the accounts. POINTS TO BE CONSIDERED Existence : The auditor should confirm that all the assets of the company are physically existing on the date of balance sheet. Possession : The auditor has to verify that the assets are in the possession of the company on the date of balance sheet. Ownership : The auditor should confirm that the asset is legally owned by the company. Charge or lien : The auditor has to verify whether the asset is subject to any charge or lien. Record : The auditor should......

Words: 5789 - Pages: 24

Premium Essay

Valuation

...of quality cement in Bangladesh. As per the course requirement we are told to conduct the fundamental analysis of Lafarge Surma Cement Limited. The company is a listed company and its shares are traded in the capital market. We have collected the annual reports of last couple of years and from the data we have prepared the proforma income statement, free cash flow and then ultimately the valuation of the company’s share. We have shown the market strategy of the company. They prefer differentiation that is high price for high quality. The industry life cycle indicates that Cement industry is in its growth stage. We have shown the competitive forces along with Michael Porter’s five force model. Competitive advantage and disadvantages are described there. Then the ratio analysis gives us the performance of the company. Then the prospective analysis gives us the intrinsic value of the company’s share, which is 16.79 Tk. whereas on 31 December, 2012 the market price was around 32 Tk. We have confirmed our valuation with the help of Sensitivity, Scenario and Simulation analysis. After the valuation we have found that the share is priced higher than the intrinsic value. That means the share is Overpriced. Holders of the share should sell the share or should take a short position of Lafarge surma’s’s share. Analysis of the performance of the company through ratio analysis on four dimensions against benchmark, peer and industry as well as over time has been done. Determining......

Words: 8111 - Pages: 33

Premium Essay

Valuation

...all the topics presented (Case 2). Objectives Throughout the paper, we will comment on the presenting team’s paper content and figures. Also, we will show why the presenting team’s calculations and paper content lacked some very important issues brought up in the case, such as, shareholder concerns and the proper way to calculate the price for the leveraged buyout (LBO). Some of the main differences between their case and ours are: • How to calculate the price for the LBO o They chose to use EBITDA o After reading various articles on LBOs we feel net present value (NPV) is a better valuation tool 3 • Focus on various financial ratios o They calculated 22 different financial ratios that were not fully analyzed and they unfairly compared Seagate to the industry (Seagate is vertically integrated making it a different entity) o We feel that the Du Pont Identity allows us to better compare Seagate to the industry • Concern for the shareholders of Seagate and VERITAS o The presenting team failed to fully analyze this aspect but the case addressed this as a major concern, “the Silver Lake transaction had to be approved by both Seagate and VERITAS shareholders” (Case 2) While the presenting team touched on some very important issues, they did not follow through with their information. Throughout the paper, we will compare and contrast our ideas to theirs and show why our figures are better suited for this type of business transaction. Overview In the next few......

Words: 8426 - Pages: 34

Free Essay

Party

...Dinner Party I walked out into my dinning room where I had been mulling over the table all day. I wanted everything to be just so. I glanced at the place settings for the hundredth time, trying to decide if I should sit Alfred Zingale and Matthias Arndt next to each other. It wasn’t that I was worried about conflicting views, actually it was quiet the contrary, and I didn’t want them to be able to double team the other guests. Finally I decided that just because they have essentially the same opinions, I wouldn’t separate them. In my mind they come as a unit because they had co-authored a book. The place cards had been set and I made up my mind that I would do no more rearranging. I bent over the table in my grey sleeveless dress and lit the deep red candles that were extending upward out of the floral arrangement. The guests would be arriving soon and I began to think over the whole situation. Each person has written a book about the dot com industry, how they can be successful as well as how to invest wisely in one. I was hoping to learn a lot of information so I could make a good decision on whether my company would benefit from being online. These thoughts drifted through my head until the doorbell rang. I opened the door to a short plump woman with reddish brown hair in her late 40’s was standing on my stoop. She wore a pale green dress suit, but looked quite attractive. She extended her arm, shook my hand and introduced herself as Anita Rosen. As the only woman...

Words: 2328 - Pages: 10

Premium Essay

Valuation

...their own management or wealthy raiders, who saw potential value in restructuring or breaking up these firms. In the 1990s, we saw a wave of consolidation in the media business as telecommunications firms acquired entertainment firms, and entertainment firms acquired cable businesses. Through time, firms have also acquired or merged with other firms to gain the benefits of synergy, in the form of either higher growth, as in the Disney acquisition of Capital Cities, or lower costs. Acquisitions seem to offer firms a short cut to their strategic objectives, but the process has its costs. In this chapter, we examine the four basic steps in an acquisition, starting with establishing an acquisition motive, continuing with the identification and valuation of a target firm, and following up with structuring and paying for the deal. The final, and often the most difficult, step is making the acquisition work after the deal is consummated. Background on Acquisitions When we talk about acquisitions or takeovers, we are talking about a number of different transactions. These transactions can range from one firm merging with another 1 2 firm to create a new firm to managers of a firm acquiring the firm from its stockholders and creating a private firm. We begin this section by looking at the different forms taken by acquisitions, continue the section by providing an overview on the acquisition process and conclude by examining the history of the acquisitions in the United......

Words: 21338 - Pages: 86

Premium Essay

Valuation

...Valuation M&A involves using more than one valuation technique to arrive at a valuation that we think is fair. The most common techniques used are: ➢ Comparable Publicly traded companies (“Public Comps”) – this analysis indicates how the stock markets are valuing companies that are similar to the target ➢ Precedent Comparable Transaction analysis (“Transaction Comps”) – this analysis indicates the valuations at which prior M&A transactions have been done in the same industry as that of the target. ➢ DCF analysis – is one of the most important valuation techniques ➢ Sum-of-the-parts analysis – If a target has more than one lines of business, the financial advisor will value each business separately. Therefore, each “part” might have its own Public Comps, Transaction comps and DCF (with different WACCs for each part). The total value is the sum of the parts ➢ Other –depending on the unique characteristics of the transaction, financial advisors will perform a number of other analyses to arrive at fair value like Leveraged Buyout (“LBO”) Analysis, Historical Exchange Ration analyses etc. Valuation M&A involves using more than one valuation technique to arrive at a valuation that we think is fair. The most common techniques used are: ➢ Comparable Publicly traded companies (“Public Comps”) – this analysis indicates how the stock markets are valuing companies that are similar to the target ➢ Precedent Comparable Transaction analysis......

Words: 343 - Pages: 2