Fluent Essays

MSc Dissertation Abstract submission Title The thesis title should give a clear indication of the topic being studied. Keep in mind: There is always the possibility to improve the wording at later stages of your research. Your future employer may ask you about the topic of your dissertation so try to make it interesting!  The Problem: The proposal should contain a description of the study problem which includes specification of the study question(s), in relation to previous research and to the literature. Keep in mind: A well – stated description of the problem will also help you to stay focused during your research .  Theoretical Framework and Background Information: the proposal should discuss the major theoretical premises and the salient concepts which underlie the problem or question(s). The proposal should then outline a framework, based on literature, for analyzing the problem and question(s).  Design and Methods The questions and/or hypotheses for the thesis are formulated clearly and in such a way that all the study variables and their anticipated relationships are specified. Procedures should be clearly outlined, including details of about data (for empirical projects) and resources (for literature review) that will be used. Keep in mind: The objectives of your thesis should be specific, measurable (you must know when you have reached your goal), achievable (don’t try to attempt too much given the time you have to complete your dissertation. A complete dissertation is always better than an incomplete one!), and realistic (for example, in the case of an empirical project do you have the resources needed to collect your data?).  Data Analysis (for empirical projects): The methods of analysis appropriate for the study design should be described.  Work Plan: The proposal should include a detailed work plan, with estimates of time needed to complete each phase of the proposed research. Keep in mind : You have time constraints!  Wordcount: min 500 - max 750 words  Penalisation: See your guidelines Assessment Criteria for MSc Dissertations – Empirical/Valuation Project General Criteria/ Marker’s Comments Introduction Literature Review Empirical/Valuation Framework and Data Description Empirical/Valuation Analysis Conclusion Written Communication (Presentation) 80+ High Distinction • -Incisive introduction • -Comprehensive and persuasive rationale • -Clear statement of the research problem and associate objectives • -Sources used with discrimination -Coherent and entirely justified conceptual framework to support the research undertaken -Sophisticated use of examples -Fully appropriate choice and application of data collection methods which is entirely justified -Correct sourcing -Highly original and creative selection of data -Strong and broad evidence of an excellent level of analysis and use of appropriate techniques -Exceptional analysis of key concepts with very clear originality and autonomy • -Strong original conclusion • -Extensive evidence of the ability to critically evaluate the research results -Excellent typography and layout -Lucid expressions -Sophisticated vocabulary -Excellent citation and bibliography norms 70 – 79.9 Distinction -Focused introduction -Subject well justified -Clear statement of the research problem and associate objectives -A wide range of sources consulted -Evidence of a sound discussion of the literature relevant to the study -Good use of examples - Fully appropriate choice and application of data collection methods, well justified -Correct sourcing -Original, well-researched selection of data -Critical appraisal and synthetic analysis -Excellent analysis of key concepts demonstrating independence of thought and a high level of intellectual rigour and consistency -Conclusion advances debates -Extensive evidence of the ability to critically evaluate the research results -Structured appropriately to the purposes of the assignment -Lucid expression with few flaws -Good use of vocabulary -Excellent citation and bibliography norms 60 – 69.9 Merit -Clear and thoughtful introduction -Subject valid and relevant -Appropriate selection and justification of the methodology adopted -Well selected range of sources consulted -Evidence of a comprehensive review of the literature relevant to the study -Appropriate examples -Appropriate choice and application of data collection methods which is also well supported. - Well – researched selection of data -Good analysis of key concepts -Development of conceptual structures and argument making consistent use of scholarly conventions -Clear conclusions -Satisfactory evidence of the ability to critically evaluate the research results -Good typography and layout -Good expression -Appropriate use of vocabulary -Few errors of grammar -Well – structured Accurate and full citation and bibliography 50 – 59.9 Pass -Fair introduction -Subject has some validity and relevance -Rationale present but of marginal relevance -A range of sources consulted -Indication of a satisfactory review of the literature relevant to the study but with some evident gaps and omissions -Limited range of examples sometimes inappropriate ones -Mainly appropriate choice and application of data collection methods with some evidence of justification -Some errors and omissions in sourcing -Mainly standard range of data used -Evidence of a satisfactory level of analysis and of use of appropriate techniques -Satisfactory knowledge of key concepts, descriptive in parts but some ability to synthesize scholarship and argument. -Fair conclusions - Some evidence of appropriate justification for critical comment on and logical development but incomplete and / or illogically developed. -Adequate typography and layout -Few serious errors of grammar; -Limited vocabulary -inconsistent citation and bibliography with significant omissions <50 Fail -Weak introduction -Descriptive with large gaps or misses the point -Minimal range of sources consulted -Little attempt to support any assertions -Minimal range use of examples -Inappropriate choice and application of data collection with no justification -Narrow or unskilled range of data used -Limited knowledge of key concepts -Use of scholarly conventions inconsistent, largely descriptive with little synthesis of existing -Weak conclusions -Conclusions sketchy or ill- matched -Poor presentation -Flawed expression -Inaccurate citation and gaps in bibliography scholarship and limited argument On line Assignment Submission Student ID Number: Name and Surname: MSc Programme: Title: Name of Supervisor: Deleting as appropriate: I do agree to allow my dissertation to be seen by future students Online Dissertation submission: Please ensure that you complete and attach this submission form to the front of your work By submitting your work online you are confirming that your work is your own and that you understand and have read the University’s rules regarding plagiarism i On line Assignment Submission Student ID Number: 180906257 Name and Surname: Zeliha Kasapoglu MSc Programme: Business Finance Title: Business analysis and valuation of Apple, Inc. Name of Supervisor: Dr. Panagiotis Koutroumpis Deleting as appropriate: I do agree to allow my dissertation to be seen by future students Online Dissertation submission: Please ensure that you complete and attach this submission form to the front of your work By submitting your work online you are confirming that your work is your own and that you understand and have read the University’s rules regarding plagiarism ii BUSINESS ANALYSIS AND VALUATION OF APPLE, INC. M.Sc. Dissertation Abstract This paper investigates a target share price for Apple, Inc. using the discounted cash flow model as the valuation technique and aims to provide an investment recommendation based on the comparison between the market price and the estimated target price. The foundation of the valuation approach is to forecast 10-year future cash flows based on their historical growth trends to estimate annual free cash flow to firm. These cash flows are discounted back to 2019 with the weighted average cost of capital to find the present value of the company. Under the guidelines of capital asset pricing model, this discount rate is estimated at 7.30\%. The paper concludes a target price of $218.62, which is +12.78\% above the market price as of 10/06/2019 and provides an in-debt analysis of the price sensitivity to the model’s assumptions that impacts Apple’s economic growth and its market position. This paper recommends investors a strong buy position based on the estimated target price, Apple’s latest strategic decisions, its strong bargaining power, and its liquidity management. AUGUST 15, 2019 ZELIHA KASAPOGLU QUEEN MARY UNIVERSITY OF LONDON iii Table of Contents Abstract .......................................................................................................................... ii Table of Contents............................................................................................................. iii List of Tables ....................................................................................................................v List of Figures .................................................................................................................. vi 1. Introduction ............................................................................................................. 1 2. Literature Review ..................................................................................................... 2 3. Data ........................................................................................................................ 3 3.1. Free cash flow to firm .................................................................................................. 3 3.1.1. Earnings before interest and debt ...................................................................................................3 3.1.2. Depreciation and amortization ........................................................................................................3 3.1.3. Capital expenditures ........................................................................................................................3 3.1.4. Effective tax rate ..............................................................................................................................4 3.1.5. Change in net working capital ..........................................................................................................4 3.2. Weighted average cost of capital .................................................................................. 4 3.2.1. Cost of equity ...................................................................................................................................4 3.2.2. Cost of debt ......................................................................................................................................5 3.3. Perpetuity growth rate ................................................................................................. 6 3.4. Terminal value ............................................................................................................. 7 3.5. Enterprise value and equity value ................................................................................. 7 4. Methodology ........................................................................................................... 8 4.1. Discounted cash flow model ......................................................................................... 8 4.1.1. Step 1: Forecasting cash flows .........................................................................................................8 4.1.2. Step 2: Free cash flow to firm ....................................................................................................... 10 4.1.3. Step 3: Discounted cash flows ...................................................................................................... 11 4.2. Sensitivity Analysis..................................................................................................... 12 iv 4.2.1. Internal justification ...................................................................................................................... 13 4.2.2. External justification ..................................................................................................................... 13 5. Results ....................................................................................................................14 5.1. Preliminary fundamental analysis............................................................................... 14 5.2. Forecasting cash flows ............................................................................................... 21 5.3. The discounted cash flow model................................................................................. 26 5.4. Sensitivity analysis ..................................................................................................... 31 6. Conclusion...............................................................................................................34 7. References ..............................................................................................................35 8. Abbreviations and acronyms ...................................................................................38 9. Appendix.................................................................................................................39 v List of Tables Table 1: Revenues by product segments (Bloomberg L.P., 2019) .......................................... 16 Table 2: Profitability ratios (Bloomberg L.P., 2019) ............................................................... 18 Table 3: Solvency and liquidity ratios (Bloomberg L.P., 2019) .............................................. 18 Table 4: Working capital ratios (Bloomberg L.P., 2019) ........................................................ 19 Table 5: Assumptions for forecasting future cash flows ......................................................... 22 Table 6: Free cash flow to firm ................................................................................................ 25 Table 7: Regression analysis variables (Yahoo Finance, 2019) .............................................. 27 Table 8: The cost of equity ...................................................................................................... 27 Table 9: The cost of debt ......................................................................................................... 28 Table 10: The cost of capital .................................................................................................... 28 Table 11: The terminal value ................................................................................................... 28 Table 12: Target equity value of Apple Inc. (Bloomberg L.P., 2019) ..................................... 30 Table 13: Price sensitivity to changes of revenue and COGS ................................................. 32 Table 14: Price sensitivity to market wide factors ................................................................... 32 Table 15: Upside / downside potential of target price due to changes in market .................... 33 Table 16: Standardized balance sheet total assets (Bloomberg L.P., 2019) ............................ 40 Table 17: Standardized balance sheet total liabilities (Bloomberg L.P., 2019) ....................... 41 Table 18: Standardized balance sheet total equities (Bloomberg L.P., 2019) ......................... 42 Table 19: Adjusted income statement (Bloomberg L.P., 2019) .............................................. 43 Table 20: Standardized cash flow statement operating and investing activities (Bloomberg L.P., 2019)................................................................................................................................ 44 Table 21: Standardized cash flow statement financing activities (Bloomberg L.P., 2019) ..... 45 vi List of Figures Figure 1: U.S. economy real GDP growth rate. (IMF, 2019) .................................................... 6 Figure 2: Discounting cash flow model general outlook ........................................................... 8 Figure 3: Comparison of revenues, COGS, gross profit (Bloomberg L.P., 2019)................... 14 Figure 4: Growth rates of the revenues and the COGS (Bloomberg L.P., 2019) .................... 15 Figure 5: Sales distribution by products (Bloomberg L.P., 2019) ........................................... 16 Figure 6: Comparison of the gross profit, the EBIT and the FCFF (Bloomberg L.P., 2019) .. 17 Figure 7: Apple, Inc. stock price and Nasdaq composite index (Yahoo Finance, 2019)......... 20 Figure 8: Apple stock price movements in the last 5-years (Yahoo Finance, 2019) ............... 21 Figure 9: Revenues and cost of goods sold forecasted (Bloomberg L.P., 2019) ..................... 23 Figure 10: Regression analysis ................................................................................................ 26 Figure 11: The target price is $218.62 (Yahoo Finance, 2019) ............................................... 29 Figure 12: Revenue growth forecast sensitivity analysis ......................................................... 31 Figure 13: COGS growth forecasts sensitivity analysis .......................................................... 31 Figure 14: Stock price curve in the last 10-years (Yahoo Finance, 2019) ............................... 39 1 1. Introduction Apple, Inc. is a California based technology company that is developing consumer electronics goods together with their accessories, computer software, media devices, third-party digital content and software applications (Apple Inc., 2018). The multinational company sells and delivers its products worldwide to retailers and wholesalers. Apple’s stock price is trading today, 10/06/2019, at $193.85 per share in the securities market under Nasdaq Stock Exchange (Yahoo Finance, 2019). This work aims to determine a target share price of Apple, Inc. by the end of 2019 using the discounted cash flow model1. The model is conducted by the forecasting free cash flow to firm based on historical trends. As a conclusion, an investment recommendation by comparing the target price to the current price is provided. The financial assessment of the valuation technique is based on the discounted cash flow approach. First, the free cash flow available to the firm is forecasted for ten years including the terminal value, then the free cash flows are discounted back to the current year using the cost of capital to determine the present value of future cash flows. Long-term forecasting is based on the historical trends of sales growth and its ratio to other variables. Cash flows are estimated by applying the same historical growth trend to future cash flows assuming that the investment policy and capital structure of the company will remain the same. The discount rate is the weighted average of the cost of equity and the cost of debt. The cost of equity calculation is based on the capital asset pricing model (CAPM) and the cost debt depends on the default rate given by the credit rating agencies. The present value of all projected cash flows is the enterprise value of the company. The equity value, or the target price, is the residual value of the company once the net debt is paid to debt holders by liquidizing all cash and cash equivalent securities. Hence, after obtaining the target price, its sensitivity to the assumptions is analysed. This paper is structured as follows. Section 3 introduces the data and variables that are used for the DCF model. Section 4 presents the ratios and methodology used for forecasting and modelling. Section 5 indicates the results of the DCF model, presents the target price and assesses its sensitivity to the assumptions. Finally, section 6 advises an investment strategy based on the conclusions. 1 According to the 2018 annual statement, yearend is reported from September to September (Apple Inc., 2018) 2 2. Literature Review The work closely follows the business valuation techniques addressed by the “Business Analysis and Valuation” book (Palepu, et al., 2013) and the “Corporate Finance” book (Ross, et al., 2016). The financial information used in the assessment is based on the 2018 annual report and proxy statement to the shareholders that are provided by the company itself (Apple Inc., 2018). The Corporate Finance Institute’s guidelines are followed to provide the most trustworthy valuation techniques (CFI, 2019). The Bloomberg Terminal is used as a data source of financial data to support assumptions that are taken for forecasting future cash flows and valuing the business (Bloomberg L.P., 2019). The Terminal provides standardized and financial statements which allow easy comparison between companies and industry benchmarks. Analyst reports and recommendations provided in Bloomberg Terminal are studied to provide a professional outlook. Forecasts of the International Monetary Fund are used for macroeconomic data such as inflation and real GDP growth (IMF, 2019). Stock price movements and related up-to-date price data are downloaded from Yahoo Finance (Yahoo Finance, 2019). The yield of the 10- year U.S. treasury bonds is taken from Yahoo Finance to obtain the risk-free rate of return. Online media resources such as highly reputable and trustworthy newspapers such as Financial Times, CNBC, Time Magazine and the Guardian Magazine are referenced to provide background information about Apple’s financial statement, its strategic decision and price curve. This paper references the book “Investment Philosophies” (Damoran, 2012) for financial ratio calculation and technical assessment. Finally, the regression analysis technique is based on the methodology explained by the “Introductory Econometrics for Finance” book (Brooks, 2014). 3 3. Data The applied valuation approach to calculate Apple’s fair value is the discounted cash flow method (DCF), where forecasted future cash flows are discounted to the current year, 2019, to obtain the total present value of the company (Palepu, et al., 2013, p. 278). The methodology is based on a 10-year valuation technique starting from 27/09/2008 until 29/09/2018. Historical financial statements of Apple are analysed to build a foundation for forecasting. This section briefly explains the financial background of variables and addresses how to access them. 3.1. Free cash flow to firm The valuation technique used in this work is based on the total cash available to the firm that is obtained from its operations and ready to distribute for internal purposes, paying off debt or returning to shareholders (Damoran, 2012, p. 109). It is the free cash flow from operating activities that is available to debt- and credit-holders when all fixed asset investments, net working capital and tax obligations are paid (Ross, et al., 2016, p. 32). 3.1.1. Earnings before interest and debt The DCF model focuses on the value generation from operating income, not from financing or investing income. Hence, the foundation of the model is estimating earnings before interest and debt (EBIT) that is generated by the sales of good and services and subtracted by the costs of goods sold (COGS) and the other operating expenses. These items are taken from the income statement of Apple. 3.1.2. Depreciation and amortization Depreciation and amortization (D&A) are non-cash accountancy items from the cash flow statement under operating activities (Ross, et al., 2016, p. 25). It amounts to the cost of assets that are depreciating over time. The remaining asset value is the economic value of the asset that is used up (Ross, et al., 2016, p. 25). 3.1.3. Capital expenditures Capital expenditures are payments to purchase fixed assets, machinery, equipment or tools to improve the operation. These are taken from the cash flow statement under “Payments for acquisition of property, plant and equipment”. 4 3.1.4. Effective tax rate Tax expenses are other non-cash accountancy items from the balance sheet. A business is obliged to pay taxes from its income due to the corporate income tax. However, not only the income but also all value generating/destroying items in a company are subject to various type of taxes such as capital gain tax, dividend tax, payroll tax, property tax etc. Instead of considering every single tax item separately, the effective tax rate covers all tax expenses and computes their annual ratio to pre-tax income. The 2017 U.S. corporate tax legislation under the President Trump administration reduced the corporate taxes from 35\% to 21\%, which also reduced overseas income tax to 15.5\%, which allowed many multinational companies to reinvest in their operations using their overseas profit (CNBC, 2018). 3.1.5. Change in net working capital Change in net working capital is a measurement of accountancy components that identify if the basic requirements of the business to run its daily operations are fulfilled at an adequate level (Palepu, et al., 2013, p. 194). These balance sheet items are the change in trade receivables, the change in payables to suppliers and the change in inventory. According to the Corporate Finance Institute, the calculation technique might slightly vary depending on the analysts’ perspective2. 3.2. Weighted average cost of capital The discounting rate with which present value of the company is calculated is the cost of capital that the investors are paying to receive a minimum required rate of return to bear the risk and achieve extra returns (Ross, et al., 2016, p. 397). The cost of capital (𝑟𝑊𝐴𝐶𝐶 ) is a function of the cost of equity (re), the market value of total equity (E), the after-tax cost of debt (rd) and the market value of total debt (D) (Palepu, et al., 2013, p. 335). The market value of the equity is the market capitalization of the stock in the equities market. 3.2.1. Cost of equity The cost of equity (re) calculation method is derived from the capital asset pricing model (CAPM) that is the expected return-beta relationship of a security relative to its market. Its 2 https://corporatefinanceinstitute.com/resources/knowledge/finance/what-is-net-working-capital/ 5 graphical representation is the Securities Market Line (Bodie, et al., 2014, p. 297). The expected return on an asset is expressed as a function of the equity beta (𝛽𝑒), the market risk premium 𝑟𝑝 = 𝐸(𝑟𝑀 ) − 𝑟𝑓and the risk-free rate of return (𝑟𝑓). The risk-free rate of return is the historical daily average yield of 10-year U.S. government bonds from 20093 until 2018 (Palepu, et al., 2013, p. 334). The average risk-free rate is at 2.46\% (Yahoo Finance, 2019). The 10-year maturity of government bonds are chosen exactly to match the forecasting period (Ross, et al., 2016, p. 400). The market risk premium (𝑟𝑝) is the extra return investors require from the market portfolio (𝑟𝑀 ) to bear the market wide risk above the risk-free rate of return (Palepu, et al., 2013, p. 334). The market risk varies depending on the country and its macroeconomic state. Duff & Phelps, a global advisory expert company in valuation and corporate finance areas, recommends 5.5\% for the U.S. market risk premium in 2018 (Duff&Phelps, 2019). The equity beta, also called as the levered beta or the systematic risk (𝛽𝑒) is the non- diversifiable market-wide risk that indicates the impact of the market-wide risk on the equity’s return (Palepu, et al., 2013, p. 331). The market portfolio is usually the market index where the company is traded or where its headquarter is located. In Apple’s case, instead of the US benchmark S&P500 index, the tech-heavy index Nasdaq Composite Index, where Apple’s stocks are traded, is chosen. This allows investors to compare Apple within the technology industry and to observe its correlation to the market-wide risk that impacts technology firms the most. 3.2.2. Cost of debt Since the DCF model is based on after-tax cash flows, the cost of debt is calculated after-tax basis considering the tax-deductibility of interest expenses and the tax shield that is created (Palepu, et al., 2013, p. 334). Hence, the cost of debt is the sum of the risk-free rate and the credit default risk of the company after-tax. The credit default is the default rate at which a long-term corporate bond issued by a company, which is graded by the credit rating agencies depending on their ability to repay the debt (David, et al., 2002, pp. 47, 48). Credit rating 3 Year 2008 is bypassed due to the financial crisis in the United States in order to assess normal years. 6 agencies rate the potential risk of repayment of the debt by specific degrees and define the creditworthiness of the corporations by these rates over their lifetime. The spread is defined by the extra cost that the investor is paying to bear the default risk of the firm. The higher a firm is rated, the lower is the cost of debt and hence its interest rate is closer to the risk-free rate of return (Damoran, 2012, p. 50). The credit default of the long-term corporate bonds of Apple are rated by the Moody’s agency at AA1 and by the Standard & Poor’s agency at AA+ (Bloomberg L.P., 2019). The AA1 level traded corporate bonds in the United States have in average a 1.00\% spread (NYU Stern, 2019). 3.3. Perpetuity growth rate The perpetuity growth rate is the constant rate at which the terminal value of FCFF growing forever. It is assumed that in an economy, cash flows do not grow at a higher rate than the economies perpetuity growth rate. As a benchmark rate, the expected growth rate of the U.S. economy is taken (Damoran, 2012, p. 102). Herewith, the real GDP growth assumption by the International Monetary Fund is applied as the perpetuity growth rate. Figure 1: U.S. economy real GDP growth rate. (IMF, 2019) IMF estimates the real GDP growth at 1.6\% from 2022 to 2024 (IMF, 2019). After 2024 the growth rate of the US economy is hardly foreseeable and uncertain. Therefore, the expected perpetuity growth rate of the FCFF after 2029 is assumed to follow the same trend and remain stable at 1.6\% as the IMF projections presume. 7 3.4. Terminal value The terminal year is the last cash flow forecasting year that is covered in the DCF model. However, cash flows beyond the terminal year are generating value as well and are important to include in the valuation exercise. The terminal value is the estimated present value of all cash flows beyond the terminal year and they are assumed to be growing at a perpetuity growth rate (Damoran, 2012, p. 107). 3.5. Enterprise value and equity value The sum of all discounted cash flows determines the fair enterprise value of the company at the calculation date that is the date to which free cash flows to firm are discounted back. The enterprise value is defined as the asset value if the company had been financed 100\% with equity (Palepu, et al., 2013, p. 347). However, in reality, there is the tax-shield advantage of debt that adds value to equity as a whole. As a result, the remaining equity value becomes the residual claim to shareholders once all debt is paid. The estimated equity value is the fair (target) value of the companies’ stocks that are driven by the cash flow structure of the company. The target price of a share is a benchmark value for the investor when compared with the market price. With the valuation approach, this paper introduces a target price that is driven by the fair value of the firm and compares it with the current trading price. 8 4. Methodology The following section introduces the techniques that are used for the valuation of Apple, Inc. following two sections: the first section explains how to obtain the target price of the company and the valuation method behind it. The second section examines how the assumptions are justified and assesses the sensitivity of the obtained target price to both external and internal assumptions. 4.1. Discounted cash flow model The first step of the discounted cash flow model (DCF) is analysing historical 10-years of cash flows and forecasting them based on their growth trend or their ratio to the sales revenues. The second step is calculating the free cash flow to firm (FCFF). The last step is discounting FCFF to current year to obtain the present value of the company. Figure 2: Discounting cash flow model general outlook 4.1.1. Step 1: Forecasting cash flows The forecasting future cash flows starts with analysing historical financial statements. The goal is to seek trends and consistent ratios to estimate future cash flows based on that conclusion. Below are the forecasting methods applied to obtain all necessary variables for the free cash flow calculation. 4.1.1.1. Sales revenues growth trend The foundation of the forecasting cash flow is sales revenues. First, the historical 10-year growth trend is analysed considering the business cycles, the U.S. economic growth and the recent strategies of the company. Second, the trend is extended to the future 10-years and additionally the growth rate of the terminal year is expected be exactly to equal as the U.S. economic growth forecasts. 9 4.1.1.2. Gross profit margin and EBIT margin The cost of goods sold (𝐶𝑂𝐺𝑆) to revenues margin is analysed to obtain the historical gross profit margin of the company: 𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 = 𝑅𝑒𝑣𝑒𝑛𝑢𝑒𝑠 − 𝐶𝑂𝐺𝑆 𝑅𝑒𝑣𝑒𝑛𝑢𝑒𝑠 (1) The same gross margin interval of the past 10-years is kept as the benchmark projection of future predictions. Next, other operating expenses such as selling, general and administration expenses, research and development expenses and other operating expenses are summed up to compute their ratio to the cost of goods sold. As a result, EBIT is the gross profit subtracted by the other operating expenses and EBIT margin is simply the ratio of EBIT to the revenues. Hence, the following equation can be applied: 𝐸𝐵𝐼𝑇 = 𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 − 𝑂𝑡ℎ𝑒𝑟 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠 (2) 4.1.1.3. Capital expenditures to depreciation and amortization ratio First, the ratio of depreciation and amortization expenses (D&A) to EBIT is calculated to obtain a benchmark ratio of how the future organic growth trend might evolve. Second, historical CapEx to D&A ratio is analysed, and the same ratio is applied to future estimations to maintain a similar performance. If the CapEx is higher than the D&A, meaning their ratio is greater than one (or 100\%), the business can not only maintain its current state but can also invest in its fixed assets to improve production and its operating performance. However, the terminal year is the year at which the company is just expected to maintain organic growth and to follow … Aim and Objectives } Enable students to advance their knowledge of the field covered by their degree programme } Independent research project (it can be either an empirical project or a valuation project) } Ability to evaluate, challenge, modify and develop theory and practice. } Offer synthetic and coherent solutions 2 } The dissertation can be either an empirical project or a valuation project ◦ For Empirical projects: ECOM146 is strongly recommended ◦ You can change your optional modules in January 2021 ◦ Data Analysis for Research, is part of the Dissertation module ◦ Ungraded ◦ Compulsory ◦ Starts in Sem B 3 } Topics discussed during Data Analysis for Research } Topics proposed by supervisors } Students need to discuss with their supervisor their topic before the proposal submission } 1st meeting with supervisor will be in March 2021 ◦ Specific dates for each supervisor to be confirmed 4 } Topic selection: Friday 5th of February 2021 } Proposal submission: Friday 16th of April 2021 } Final submission: Monday 23rd of August 2021 } Dissertations that are submitted late will be penalised at the rate of 5 marks deduction for each 24 hour period after the set submission time, down to the pass mark. } Work submitted 7 calendar days or more after the deadline will be awarded zero (check your handbook). This rule applies for all days including weekends. 5 } Supervisory activities start on the 7th of June 2021 which is the first Monday after the end of the exam period. } The last day of supervision is Thursday the 5th of August 2021. After that date you can no longer arrange any further meetings with your supervisor and/or your teaching assistant } It is your responsibility to arrange your meetings with your supervisor and teaching assistant on time. 6 } 7,000 words (ECOM107) ◦ Do not forget, this is equal to a 45 credits module! } 4,000 words (ECOM093) ◦ Do not forget, this is equal to a 30 credits module! } Work that exceeds the stated word limit shows a failure to synthesise material and edit work as to present argument/data concisely. ◦ This will be noted in the feedback and reflected in the grade awarded. 7 } There will be an online session straight after the exam period in June about citing and referencing. The exact date and time will be announced at a later stage. 8 Plagiarism } Your dissertation should be the output of your own work. } Incorrect referencing and citations may be considered plagiarism. } For detecting plagiarism, the School uses Turnitin. } Before your final submission, you will be able to check your work on Turnitin 9 } The dissertation is intended to provide an opportunity for students to pursue a valuation/research project independently } Students are entirely responsible for the work for their dissertation. } The role of the supervisor is to offer advice and guidance, not to direct the research. } Your supervisor will help you to identify a topic, to draw up a suitable preliminary bibliography and to plan the primary and secondary research you will need to do for the dissertation. } He/she will be available to advise you on approach, coverage, questions to be asked and the outline structure and research design. 10 } More specifically, the supervisor is expected to: ◦ assist you in the definition and organisation of your project in the early stages of preparation; ◦ offer you advice about sources; ◦ advise you on the feasibility of what you plan to do; ◦ approve your dissertation proposal. 11 } You must not expect the teaching assistants to do the work for you! } The role of the teaching assistant is to offer assistance at various stages of your dissertation } For empirical projects ◦ the teaching assistant will assist you on how to download data and use library resources. If you also need help with the statistical package (Eviews, STATA etc) you use, teaching assistant will give you guidance. ◦ the teaching assistant will assist you on how to download papers using the QMUL library resources and/or show you alternative ways to do so. } Teaching assistant will not give you suggestions about your research approach and will not recommend research methods and literature. Teaching assistants have a supportive role only. 12 } Four (4) meetings in total ◦ One meeting before the proposal submission deadline (16/04/2021) ◦ Three meetings during the supervisory period (07/06/2021 – 05/08/2021). 13 } Four (4) meetings in total during the period of supervisory activities (14/06/2021 – 05/08/2021) } Students can pick up available slots that teaching assistants will release well in advance } Only one (1) meeting until the end of June } Then, one (1) meeting every two weeks ◦ Students are expected to stay in close proximity to the campus during the whole supervisory period 14 } On QM+ by uploading your document and by email to [email protected] (both in electronic form) } Students are responsible for the proper upload of their documents } Make sure that you upload your documents well in advance before the deadline (23/08/2021) 15 mailto:[email protected] } Applications for extensions will only be considered if accompanied by a medical certificate (in English) (see your handbook for more details) } Extenuating Circumstances are ultimately verified by the Exam Board and can be rejected. } Students that fail to submit by the deadline may submit the following year but this attempt will be capped at 50\% 16 Dr Thomai Filippeli MSc Dissertation Coordinator Email: [email protected] Room: GC 5.19 17 mailto:[email protected]