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Learning to Invest / Valuation Strategies
|Subject: Re: Discounted Cash Flow Model - Negative FCF||Date: 5/9/2011 12:06 PM|
|Author: atta9508||Number: 1653 of 1675|
Joe – Here is my biggest weakness. I don't know enough about company evaluation so don't have a good intuative sense of what makes a company a good investment. For Tyson I looked at whether the majority of analysts rated Tyson as a buy. They did so I decided to take a closer look.
Here are some of my assumptions.
Cost of Borrowing: 4.8% (Assumed default spread of 1.6%, added to T-Bond Rate)
Market Risk Premium: 4%
Growth Rate of EBIT = 3.5% per year and 3.5 after year 10
Reinvestment Rate: Starting at 8% and changing to near industry average in 10 years (20%)
For now I have excluded operating leases.
It seemed to me that I have assumed a pretty conservative growth rate and normal reinvestment rate and they still appear undervalued, so a buy to me. Let me know if you need other information. Also feel ask questions. I am new to this.
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