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Case
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Reference no. 114-002-1
Authors:
Amiya Kumar Sahu (Goa Institute of Management); Amrita Chakraborty (Indian School of Business)
Published in:
2014
Length:
12 pages
Data source:
Published sources
Abstract:
This case is designed to learn firm valuation using discounted cash flow method. Students are advised to compute the fair value of Hero MotoCorp Limited and review the value recommended by analysts. Students learn to forecast sales, financial statements, estimate free cash flows and other inputs into a valuation model. Students also learn analysis of financial statements, drivers of growth and earnings, and impact of corporate strategy on firm value. Additionally, students learn computation of cost of capital in an emerging market context of India. A teaching note is available.
Learning objectives:
1. Valuing an Indian manufacturing company using DCF method. Students learn the DCF model and its application in the Indian context which is different as compared to other countries eg the US. 2. Forecast the sales and financial statements of a typical manufacturing firm in India. The growth rates are different in an emerging county. Hence, future economic growth and growth expected by the industry are key to making assumptions. 3. Computation of cost of equity and cost of capital. Estimating market risk premium, risk-free rate and applicaion of CAPM in an emerging market context.
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