Fair market value

#1
Hi there,

I am currently working on an assingment on an infrastructure company (a unit trust company) who has issued stapled security and would appreciate if a learned maestro could help me with the following questions:

1. How to calculate the most probable fair market value of a share of this company at IPO?

2. How to calcuate the most probable fair market value of a share of this company after a particular period i.e say 6 months after floatation?


Any reference to useful links/ text books would be much appreciated.

Thanks in advance

King Jr
 
Last edited:

DanPickUp

Well-Known Member
#2
Hi KJ

Interesting questions you have. You may work your self through the following stuff from Investopedia:

Valuation Analysis

What Does Valuation Analysis Mean?

A form of fundamental analysis that looks to compare the valuation of one security to another, to a group of securities or within its own historical context. Valuation analysis is done to evaluate the potential merits of an investment or to objectively assess the value of a business or asset.

Valuation analysis is one of the core duties of a fundamental investor, as valuations (along with cash flows) are typically the most important drivers of asset prices over the long term.

Investopedia explains Valuation Analysis

Valuation analysis should answer the simple, yet vital, question of, "What is something worth?" The analysis is then based on either current projections or projections of the future. While investors can agree on a metric like the current price-to-earnings ratio (P/E ratio), how to interpret a given valuation can and will differ among those same investors.

Many types of valuation methods are used, involving several sets of metrics. For equities, the most common valuation metric to use is the P/E ratio, although other valuation metrics include: Price/Earnings, Price/Book Value, Price/Sales, Enterprise Value/EBIDTA, Economic Value Added and Discounted Cash Flow.

Read more:http://www.investopedia.com/terms/v/valuation_analysis.asp#axzz1VYd6Etyg

and you may also like to learn more about this:

DCF Analysis: Introduction

By Ben McClure

It can be hard to understand how stock analysts come up with "fair value" for companies, or why their target price estimates vary so wildly. The answer often lies in how they use the valuation method known as discounted cash flow (DCF). However, you don't have to rely on the word of analysts. With some preparation and the right tools, you can value a company's stock yourself using this method. This tutorial will show you how, taking you step-by-step through a discounted cash flow analysis of a fictional company.

In simple terms, discounted cash flow tries to work out the value of a company today, based on projections of how much money it's going to make in the future. DCF analysis says that a company is worth all of the cash that it could make available to investors in the future. It is described as"discounted" cash flow because cash in the future is worth less than cash today. (To learn more, see The Essentials Of Cash Flow and Taking Stock Of Discounted Cash Flow.)

Read more:http://www.investopedia.com/university/dcf/default.asp#axzz1VYd6Etyg

Tc

DanPickUp
 

DanPickUp

Well-Known Member
#4
Too many variables involved to make an accurate estimation far into the future.
Fine !

As you are an expert for accurate estimations far into the future, which variables do we have to take out to make an accurate estimation far into the future ?

Thank you to a pro
 

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