The Importance of the Financial Evaluation of Projects - Dissertation Example

Since the offer now standing is still to be finalized, the situation presents an ideal basis for analysis and the formulation of a recommendation about a future managerial decision.The dissertation undertook a comprehensive financial analysis of each of the firms involved, to determine the status of the acquiring firm and the potential of the target firm to add value to the acquirer. Horizontal and vertical analysis of audited financial statements yielded insights into the strengths and weaknesses of these companies, and comparative ratio analysis and compound growth rates showed how the strengths and weaknesses of the two may complement one another.

Studies on the valuation of the takeover bid using PE ratio analysis and dividend discount constant growth model, the possible investment risks posed, and the assessment of the possibility of financial failure through the use of Altman’s Z-score were undertaken. The resulting recommendation is a positive endorsement of the acquisition of Massmart by Wal-Mart at the indicative price of US$21.10.In this chapter, the topic of the dissertation is introduced and its context elaborated upon to provide a foundation upon which the research objective may be situated.

The conceptual framework is presented which outlines how the topic shall be pursued and analyzed. The research problem and questions are stated to provide the focus of the inquiry. The importance of the research topic is then discussed, followed by a consideration of the ethical issues that are involved in the course of the development of this dissertation.In a capitalist economy, investors play the crucial role of the capitalists. Among the four factors of production, it is capital that takes the risk of a productive undertaking, since it bears the losses that may result from the adverse turns of fortune.