BUSI 534 Business Valuation

For information regarding prerequisites for this course, please refer to the Academic Course Catalog.

Financial managers are often tasked with evaluating a company’s worth in terms of a company’s potential buying or selling price. There are different models that may be used for this evaluation, and determining the most appropriate model to use may depend on the industry. The student earning a graduate finance degree should understand these key components.

Textbook readings and lecture presentations/notes

No details available.

Course Requirements Checklist

After reading the Course Syllabus and Student Expectations, the student will complete the related checklist found in the Course Overview.

Discussions (5)

Discussions are collaborative learning experiences. Therefore, the student is required to create a thread of at least 450 words in response to the provided prompt for each Discussion. For each thread, the student must support his/her assertions with at least two (2) scholarly/professional sources (note that Investopedia and Wikipedia are not scholarly/professional sources). Sources MUST be cited at the end of the post using proper APA format.

In addition to the original thread, the student must reply to at least two (2) classmates’ threads. Each reply must be at least 250 words. The student should not just say “good job” or “I learned something from your post.” Replies are not a cheering exercise. Instead, the replies must be substantial, reflecting what the student learned from reading the post, offering an extension, or correcting a mistake. The student should use what he/she learned in researching for the post (or knowledge gained from other classes or personal experience) to either supplement or critique the replies. References are not required for replies. 

Valuation Issue Assignment

Using the first four chapters in the Hitcher textbook as the primary reference, and supplemented by appropriate secondary sources, the student will identify and discuss two (2) specific issues or challenges that valuation professionals face when attempting to properly assess the current value of a private business. The paper should have an Introduction, two “body” parts (specific issue or challenge one and specific issue or challenge two) appropriately titled, and a Conclusion. The body parts need to clearly define the issue/challenge, fully discuss why this issue/challenge is important, and suggest what valuation professionals can do to limit the impact of the issue/challenge.

• Assignment length: At least 750 words (excluding title page and references) in current APA format.
• Number of citations: At least 3 (in addition to the textbook, which must be the primary references). Remember: any article/source listed in the references must be cited at least once in the paper.
• Accepted sources: Books or other scholarly/professional sources. Remember, Investopedia, Wikipedia, websites, periodicals (e.g., newspaper, magazine, newsletters), and blogs are not scholarly/professional sources. These can be used in the paper (if properly cited), but they do not count towards the required number of citations.

Valuation Approach Assignment

Using the Hitcher textbook as the primary reference, and supplemented by appropriate secondary sources, the student will write a research paper that compares and contrasts the three main approaches used to value a private business. The paper should have an Introduction, five “body” parts (approach 1, approach 2 and approach 3, similarities between approaches, and differences between approaches) appropriately titled, and a Conclusion. In each of the first three body parts, the student must describe the approach, note the data needed to apply the technique, and discuss limitations or challenges to properly executing the approach. In the next two sections, the student needs to clearly demonstrate what the approaches have in common and how they differ.

• Assignment length: 6 – 10 pages, double-spaced (excluding title page and references) in current APA format.
• Number of citations: At least 4 (in addition to the textbook, which must be the primary references). Remember: any article/source listed in the references must be cited at least once in the paper.
• Accepted sources: Books or other scholarly/professional sources. Remember, Investopedia, Wikipedia, websites, periodicals (e.g., newspaper, magazine, newsletters), and blogs are not scholarly/professional sources. These can be used in the paper (if properly cited), but they do not count towards the required number of citations.

Company Report

For this assignment, the student must write the first part of the complete valuation report. This section of the report discusses the company, the industry in which the company operates, and the economic outlook that may impact the company’s value. The following three major topics (i.e., Business Description, Industry and Trends, and Economic Outlook) must be included in the paper (the bullet point items under each topic are suggestions; the student may discuss all, some of these items, or completely different items):

Business Description

• Description of the company, its industry, size and location
• Brief history of the business from its inception to the current period
• Nature of the Business
• Products or Services
• Key markets served
• Key customers and/or suppliers
• Marketing strategies
• Key competitive strengths/weaknesses/protections/exposures
• Business risks
• Other

Industry and Trends

• Major competitors
• Growth prospects
• Potential threats and benefits for the overall industry
• Other

Economic Outlook

• GDP, inflation, interest rate, unemployment, and other forecasts
• Commodity prices and exchange rates
• The political environment
• Potential business tax rate changes
• The overall state of business investment and capital spending
• Other

The items the student chooses to discuss for each major topic depend on the company and what he/she believes is important to the valuation of the business.

• Assignment length: At least 10 pages, double-spaced (excluding title page and references) in current APA format.
• Number of citations: At least 6 (with a minimum of 2 articles per major topic). Remember: any article/source listed in the references must be cited at least once in the paper.
• Accepted sources: Books or other scholarly/professional sources. Remember, Investopedia, Wikipedia, websites, periodicals (e.g., newspaper, magazine, newsletters), and blogs are not scholarly/professional sources. These can be used in the paper (if properly cited), but they do not count towards the required number of citations.

Company Report

For this assignment, the student will need to have the chosen company’s most recent annual report and the report two years prior to that (e.g., 2019 and 2017 or 2020 and 2018). With two years of annual reports, the student will have four years of income statements (e.g., 2016, 2017, 2018 and 2019 if the student has the 2017 and 2019 annual reports or 2017, 2018, 2019 and 2020 if the student has the 2018 and 2020 annual reports).

Using the financial statement data in the company’s annual reports, the student will create a comprehensive written analysis of the company’s financial operations for the four most recent fiscal years. The written report should be structured as follows:

Part I: Construct common size income statements for the four most recent fiscal years (that is why the student will need the two most recent annual reports). Also, the student will include a line listing the annual growth rate in net revenue (or sales) for the four most recent years. The student must write an analysis of the table he/she created. For example: What trends can be observed? What appears to be areas of strength or weaknesses? For what areas would the student like additional information? What are any potential areas of significant concern? Anything else?

Part II: Construct a table of ratios for the four most recent fiscal years (that is why the student will need the two most recent annual reports). The student will write an analysis of the ratio table he/she created. For example: What trends can be observed? What appears to be areas of strength or weaknesses? What are any potential areas of significant concern? Anything else?

Part III: Create a statement of cash flows table for for the four most recent fiscal years (that is why the student will need the two most recent annual reports). For this statement, the student only needs to list the three net accounts (i.e., Net Cash Flows from Operating Activities, Net Cash Flow from Investing Activities, and Net Cash Flow from Financing Activities). Then, the student will evaluate these statements over this time period. What has been the major source of cash each year and what has been the major use of cash? Has the company generated sufficient internal cash to finance any capital spending? Anything else?

Part IV: Based on the comprehensive analysis of the chosen company, the student will identify specific risk factors that should be considered when doing the valuation estimate.

The paper should include an Introduction, the four “parts” listed above, and a Conclusion. The student must embed the tables into the paper where they flow with the discussion (that is, tables should not be put in an appendix). Tables are best created in Excel and then copied and pasted special into the Word file using “Picture (Enhanced Metafile).”

• Assignment length: At least 8 pages, double-spaced (excluding title page and references) in current APA format.
• Number of citations: At least 3 (with a minimum of 2 articles per major topic). Remember: any article/source listed in the references must be cited at least once in the paper.
• Accepted sources: Books or other scholarly/professional sources. Remember, Investopedia, Wikipedia, websites, periodicals (e.g., newspaper, magazine, newsletters), and blogs are not scholarly/professional sources. The can be used in the paper (if properly cited), but they do not count towards the required number of citations.

Company Report

For this assignment, the student will conduct a valuation estimate for the chosen company. The report should include (at a minimum) the following sections:

1. Introduction
2. Description of the valuation approaches and methods considered (note, unless the student has a specific reason why one of the three valuation approaches discussed in Hitcher does not apply to his/her chosen company, he/she should apply all of the Hitchner approaches to the company valuation).
3. Identification and evaluation of any nonoperating and/or excess assets.
4. A risk analysis of the chosen company and an associated discussion of how applicable discounts and premiums (if any – remember, the student will “assume” that the chosen company is private) were computed.
5. Application of valuation approaches and methods used to the chosen company (in this, the largest section of the paper, the student must completely and clearly demonstrate how he/she derived a specific value estimate for the company using each approach; thus, the student will end up with three values that will most likely not be the same).
6. Reconciliation of the three valuation approach estimates (which is most accurate and why).
7. For the first time in this assignment, the student should look up the company’s stock price on the last day of the financial data (for example, if the company’s fiscal year end is June 30 and the last data that was used in the report was June 30, 2020, the student should look up the stock price on June 20, 2020, or the closest trading day to that date). Using that stock price, the student should compute the market value of the chosen company and compare that value to the reconciliation number. Which is higher? Why? What is the buy/sell recommendation based on this comparison? Why?

For this specific assignment, all relevant data tables should be included Appendices. The tables must be clearly titled/labeled so it is easy to find the tables when they are discussed in the main body of the paper.

• Assignment length: At least 10 pages, double-spaced (excluding title page and references) in current APA format.
• Number of citations: At least 3 (with a minimum of 2 articles per major topic). Remember: any article/source listed in the references must be cited at least once in the paper.
• Accepted sources: Books or other scholarly/professional sources. Remember, Investopedia, Wikipedia, websites, periodicals (e.g., newspaper, magazine, newsletters), and blogs are not scholarly/professional sources. These can be used in the paper (if properly cited), but they do not count towards the required number of citations.

Faith Integration Assignment

The student will complete an essay describing how the Bible is related to the topics covered in the course. The essay must include a clear integration of the Bible in relation to a course topic.

• Assignment length: At least 500 words (excluding title page and references) in current APA format.
• Number of citations: At least 2 (in addition to the Bible). The student may use the course textbook as one of his/her sources. Remember: any article/source listed in the references must be cited at least once in the paper.
• The student may use the Bible as often as he/she would like, but it only counts as the required use of the Bible – not one of the additional scholarly/professional sources.
• Accepted sources: Books or other scholarly/professional sources. Remember, Investopedia, Wikipedia, websites, periodicals (e.g., newspaper, magazine, newsletters), and blogs are not scholarly/professional sources. These can be used in the paper (if properly cited), but they do not count towards the required number of citations.