ACCT6003 Financial Statement Analysis Week 11 Workshop on valuation
and forecasting For the Week 11 assignment you are required to
implement the residual operating income valuation model (ReOI) for
Woolworths Ltd using the Excel spreadsheet that was provided on
Canvas in Week 11. This spreadsheet contains the reformulated
statements and profitability analysis of Woolworths during 2008-2017.
Assume that right now you are at financial year end 30 June
2008, and that the provided reformulated statements for
Woolworths during 2009-2017 represent analysts’ forecasts (that are
in fact perfect forecasts in this case). Assume that Woolworths has a
fixed cost of equity capital of 8%. Assume also a cost of debt before
tax at 5.85% and a marginal tax rate of 30%. We also know
that Woolworths’ price as at 30 June 2008 was $24.95 per share. Required:
(1) You are required to calculate the intrinsic price for Woolworths as
at end of 30 June 2008 using the ReOI valuation model. Report the ReOI
valuation exercise in a separate worktab in the same Excel
workbook. Name this new worktab as ‘ReOI’ and submit the Excel
spreadsheet for marking. (2) In a separate Word or PDF report, give
three (3) reasons that explain why the intrinsic price estimated
by the ReOI model is different than the actual price even
though we have perfect forecasts. The maximum words is 400.
