A New Company Valuation Model and its Application On the Royal Bank of Scotland Plc - Essay Example

Bank of Scotland consortium, where the transaction price was approximately €72billion and in the end, this investment was found to be worth nearly zero. Investors have lost billions of pounds and dollars amidst hypes of valuations in practically everything where one may look for an opportunity to invest safely and expect returns. One of the reasons for such losses is that investors are not sufficiently well informed about their investment decisions that they are making or the risks that they are taking on.

Buyers tend to depend upon market information published by various organisations or rating agencies. The irony is, these agencies themselves have been inflating the values amidst their own problems. Accordingly, the valuation of companies should no longer be treated as sacrosanct. The specialised lengthy and complex process that companies carry out to make decisions pertaining to mergers and acquisitions can no longer be taken for what it is. Every investor buying shares in a listed company should have reasonable visibility into the value of the company so that he/she can judge the risks and develop balanced portfolios.

This dissertation will document comprehensively the current generally accepted concepts and methodologies of company valuation techniques. In addition it will be my endeavour to propose an integrated model in which the investors can apply data and information and evaluate the company value with a reasonable level of accuracy. In this dissertation an effort has been made to address the problems related to the methodology of valuations that has been adopted recently to predict the net worth of companies.

The current financial valuation techniques of a company primarily comprise of four methods (Jacob, 2004: pp1-4 and Fernandes, 2007: pp2-19); All four methods result in different ways of thinking and often in different valuations. The investors normally do not understand which method is more suitable for them to use for making the most informed