Development Appraisal, Project Cost Control Assignment

Development Appraisal, Project Cost Control - Assignment Example The building and construction sector includes contractors who build buildings for residential, industrial and commercial purposes. SECTION-A Question 1 This is a case whereby companies operating in the construction industry need to develop, differentiate,  defend and communicate the development  contribution  they  make to their host country   in just the same way as they manage the value they delivered to customers. Taking a case of buildings:   There are various aspects that defines these statement ‘‘Development value’’ in a more scientific way. ... 2. Four methods of valuation and their illustration using appropriate examples These methods include; DCF valuation LBO valuation Comparable companies’ valuation Precedent transaction valuation A DCF (Discounted cash flow) valuation is a valuation method where future cash flows are discounted to present value. The valuation approach is widely used within the investment banking and private equity industry. In a DCF valuation, one has tom obtain data which includes; historical financial information, working capital, make future projections and calculate unlevered cash free flow, determine capital structure, WACC, present value of free cash flow, enterprise value and finally come up with a DCF sensitivity analysis which now shows the valuation changes with different assumptions and changes in input (Notman, 1998). A LBO (Leveraged Buyout Analysis), valuation is the acquisition of another company using a significant amount  of borrowed money (bonds or loans) to meet the cost of an acquisition. It is used to determine an implied valuation range for a given target in a potential LBO sale based on achieving acceptable returns (O'Sullivan & Sheffrin, 2003). In this kind of valuation the following is taken into account; deal value, historical financials, forecast period, results and output. A comparable company’s analysis is always used in company valuations and is a relative valuation method (Notman, 1998). The method indicates the value of similar companies in relation to different key ratios that is later compared to your business. Common key ratios are: EV/EBITDA and EV/SALES. For this to be successful, one needs to select the multiples of companies, locate the necessary financial information, and spread key statistics ratios and trading multiples benchmark