3.Assignment TopicXYZ Ltd is a diversified company that owns more than 20 subsidiary companies...

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3.Assignment TopicXYZ Ltd is a diversified company that owns more than 20 subsidiary companies spanning many sectors of the economy. It is considering buying all the issued ordinary shares of a competitor company.The problem for XYZ Ltd is that the takeover target does not have its shares listed on the stock exchange. Accordingly, it is not possible to obtain from the market a price for the target’s ordinary shares. The board of directors of XYZ Ltd. has given you the task of providing an estimate of the intrinsic value of the target’s ordinary shares.i.What model would you recommend using to determine the intrinsic value? Explain the reasons for your selection?ii.What data does the model require you to determine the intrinsic value?iii.How could you estimate the dividend growth rate and the required rate of return?	Note: Maximum word is 2000 except content list, cover page and references.			Document Preview:				1.  Presentation Assignment needs to submit by using the following guideline: Contents Executive Summary Introduction Findings (explain the answers of the questions) Conclusion List of references    2.  Assessment criteria In assessing submitted assignments consideration will be given to overall neatness, completeness and quality of presentation, timeliness of submission and demonstrated application of appropriate analysis of financial statements.  3.  Assignment Topic XYZ Ltd is a diversified company that owns more than 20 subsidiary companies spanning many sectors of the economy. It is considering buying all the issued ordinary shares of a competitor company.  The problem for XYZ Ltd is that the takeover target does not have its shares listed on the stock exchange. Accordingly, it is not possible to obtain from the market a price for the target’s ordinary shares. The board of directors of XYZ Ltd. has given you the task of providing an estimate of the intrinsic value of the target’s ordinary shares.  What model would you recommend using to determine the intrinsic value? Explain the reasons for your selection?  What data does the model require you to determine the intrinsic value?  How could you estimate the dividend growth rate and the required rate of return?  Note: Maximum word is 2000 except content list, cover page and references.   4. 	Referencing   Correct referencing is important for two main reasons. The first is to enable the reader to access source material you have relied upon, should they care to. The other is to ensure that you have properly recognized the contribution of the work of others to your assignment. If you do not do this properly, you are engaging in plagiarism—the theft, intentional or otherwise, of the intellectual or creative work of others.         9. Marking Criteria Format  Marking Criteria Very PoorPoorSatisfactory GoodVery good  MARKEvidence of research (5 marks) interpreted the questions answers ...

Robert · Accepted Answer

Executive Summary 
The market mostly overvalues the financial assets due to speculation. This makes it difficult to 
calculate the proper value of a firm. The intrinsic value should be used to take informed 
decisions. Therefore, information from financial statements should be used to calculate the value 
of a company. The main objective of this paper is to determine the intrinsic value of a non-listed 
company. The market is used as a benchmark to calculate the intrinsic value of a company. U.S. 
publicly-traded investment companies are supposed to report the total market value of each of 
their funds in accordance to generally accepted principles, including suitable guidelines for the 
valuation of unlisted securities. The total market value of a company can be known as intrinsic 
value, investment value, fair value, net asset value or any other similar term. The significant 
aspect is that the methodology used in valuation shall be disclosed so that informed decisions can 
be taken by the investors. 
In case of unlisted securities, there is no objective market price to function as a proxy for value, 
so a subjective measure is unavoidable. This makes the scope for abuse in the valuation of 
unlisted securities. The proportion of abuse is restricted by two aspects. Firstly, in most 
companies unlisted shares consist of a small percentage of total asset value. Secondly, the 
disclosed method of calculating a price for each unlisted security is based on assumptions, like 
forecast of future cash flows, which should be made open and be reasonable. 
The valuation methods and assumptions selected to calculate the prices of unlisted securities 
show whether the investors are aggressive or conservative. This information also enables 
investors to take better informed decisions.
Contents 
Introduction ..................................................................................................................................... 3 
Dividend Discount Model ............................................................................................................... 4 
Gordon Model ................................................................................................................................. 4 
Residual Income Model .................................................................................................................. 5 
Discounted Cash Flow .................................................................................................................... 6 
Analysis of Case ............................................................................................................................. 6 
Model to be used: ........................................................................................................................ 6 
Dividend Growth Rate Calculation: ............................................................................................ 8 
Required Rate of Return Calculation: ......................................................................................... 8 
Conclusion ...................................................................................................................................... 9 
References ..................................................................................................................................... 10
Introduction  
Intrinsic Value is the perceived market value of a stock and is considered as a significant aspect 
by the investors when deciding which investment to choose for investment. Intrinsic Value is 
also known as fair value. Various methods or techniques are used to evaluate whether the 
intrinsic value of a security is higher or less than the current market price. This helps the investor 
to determine whether the stock is overvalued or undervalued. In estimating the intrinsic value of 
a stock, the appropriate margin of safety can be determined by the investor, where the market 
price is less than the estimated intrinsic value. By leaving a cushion between the least market 
value and the intrinsic value,

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3.Assignment Topic XYZ Ltd is a diversified company that owns more than 20 subsidiary companies spanning many sectors of the economy. It is considering buying all the issued ordinary shares of a...

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