The Report Is Divided In Two Parts. The First Part Is (A)

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The report is divided in two parts. The first part is (a) about analysing the value of Balfour

Group by using the shareholder value analysis model (SVA) for last two years and show

critical evaluation about how this model is appropriate to value the company in numerical

terms. Also, the report provides critical discussion for those variables which influences the

valuation of company by using sensitivity analysis. In addition, it will compare the actual

value of Balfour with SVA model estimated value and explain the reasons of differences.

The second part of report is (b) to identify and evaluate critical issue facing the company in

the last years using the appropriate finance theories.

Justification of using SVA model

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Also, it is highly sensitive to assumptions rather it does reflect only

firm dividends but, not shareholder’s value(Nguyen T.PowerPoint slides, day three 13th

Dec. 2015). Also, according to Sherman and Milledge (2005) thethird valuation model is:

Valuation on multiples which is based on comparing a company with known market value



CFV ( 2016)


peers. According to Financial Times (2016) and statistical report of market, EPS growth

ratiosfor Balfour was negative, sector 18.74% and for market 5.30% which is very volatile

and difficult to predict as well as true comparable companies and market value might not

be correct. Therefore, it is not helpful for potential investors. Fourth valuation model is:

Discount Cash Flow (DCF) which is used for cash-generating businesses according to the

present value of expected cash flow on the asset. But, it might cause market inefficiency

because it needs accurate price of asset based on it is life, cash flow, and discount rate for

the same. Although, the above models have some advantages but, the SVAis more

appropriate for potential investors.

Shareholder value analysis (SVA) model was developed by Alfred Rappaport in 1980. It is

one of shareholder tools which is used to illustrate the relationship between principals and

managers through agency theory (Eisenhardt, 1989). Also, it measures historical

performance and explain the difference between actual and expected SVA

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