As a new inferior analyst for your firm, your aboriginal appointment is to research, analyze, and amount Johnson & Johnson banal (NYSE listed). Your bang-up recommends chargeless prices based on both the discounted banknote breeze adjustment and commensurable P/E arrangement method. You are anxious about your boss’s advocacy because your Corporate Finance assistant explained that these two appraisal methods can aftereffect in broadly differing estimates back application absolute data. You are acquisitive the two methods will ability agnate prices. Good luck with that!Your appointment is:
Acquisition and download the Johnson & Johnson 2020 Annual Report including Form 10-K for the budgetary year catastrophe December 31, 2020.
Go to Reuters (http://www.reuters.com) and access the attribute for Johnson & Johnson (JNJ) in the chase box at the top of the web folio (select Johnson & Johnson JNJ). From the Reuters website aggregate the afterward advice (you should be able to acquisition this in the chargeless sections) and access it into an Excel spreadsheet:
The accepted banal amount (last barter – high larboard of page)
The EPS (TTM)
The cardinal of shares outstanding
The Industry PE Arrangement (TTM) – you may charge to attending abroad for this.
From the Key Metrics tab annal bottomward to acquisition the Acquirement Advance Amount (5Y), access the cardinal in your spreadsheet.
Go to Morningstar (http://www.morningstar.com) and access “JNJ” into the “Search Quotes and Site” box. Baddest Johnson & Johnson beneath the U.S. Securities section. Beneath "Financials" bang Assets Statement. Archetype and adhesive (or use “Export to Excel to actualize afresh file) the best contempo three years (2018-2020) of assets statements into a new worksheet in your absolute Excel file. Repeat this for the antithesis bedding and the banknote breeze statements for Johnson & Johnson. Keep (or copy) all the altered banking account abstracts in the aforementioned Excel worksheet NOTE: Make abiding you are accession the Annual data, NOT the Quarterly data.
To actuate the banal amount application the discounted banknote breeze method:
Anticipation the chargeless banknote flows. Start by application the absolute abstracts from the banking statements downloaded from Morningstar to compute the three-year boilerplate of the afterward ratios:
Tax Amount (income tax expense/income afore tax)
Property, bulb & equipment/Sales
Depreciation/property, bulb & equipment
Net alive capital/sales
Actualize an abandoned timeline for the abutting bristles years
Anticipation approaching sales based on the best contempo year’s absolute acquirement growing at the LT advance amount (5Y average) from Reuters for the aboriginal bristles years of the forecast.
Use the boilerplate ratios from footfall 5. a. aloft to anticipation EBIT, acreage bulb & equipment, depreciation, and net alive basic for the abutting bristles years.
Anticipation the the chargeless banknote breeze for the abutting bristles years application Eq. 10.2 from the argument (Section 10.1 in text).
Actuate the border action amount for year 5 application Eq. 10.6 and a abiding advance amount of 4% and a amount of basic of 11% for JNJ.
Actuate the action amount of the close as the present amount of the chargeless banknote flows.
Actuate the banal amount application Eq. 10.4. Note: your action amount is in bags of dollars and the cardinal of shares outstanding Is in billions.
To account an appraisal of the JNJ amount based on a commensurable P/E Ratio, accumulate the industry boilerplate P/E arrangement by JNJ EPS.
Compare the banal ethics from both methods to the absolute banal price
two-page summarizing analysis and appraisal with a few abrupt arbitrary exhibits answer how your assay and angle are quantified in your appraisal model. Would you acclaim advance in the company? Why or why not?
Order a unique copy of this paper
Top Academic Writers Ready to Help
with Your Research Proposal