Financial Analysis of Vestas

This is a Danish company listed at the Copenhagen stock exchange

ASSIGNMENT TASK
Vestas is a Danish company listed at the Copenhagen stock exchange. From the company’s website:
“Vestas is the world leader in delivering Modern Energy. We have already installed over 39,000 wind turbines in 63 countries on five continents. In 2008, Vestas installed a new turbine every three hours worldwide, generating more than 60 million MWh a year, enough power to provide electricity for every household in a country the size of Spain with its population of 45 million. That is why Vestas is No. 1 in Modern Energy.” (http://www.vestas.com/en/about-vestas/profile.aspx, accessed 15/12/2009).

Information on the company’s operations is available from the company website:
http://www.vestas.com/en/.

Information on the company’s finances is available from
• the company website, by following the link to Investor Information
• the Thomson One Banker database, accessible through the Oxford Brookes University library web pages (in electronic databases; username = oxbrookes01@Oxford.ac.uk; Password = aaa; Username: not case sensitive; Password: case sensitive)
Share price data, charts and other technical information are available on uk.finance.yahoo.com or Thomson One Banker.

Required:
1. Discuss the market valuation of Vestas. To support your discussion:
• Estimate the Weighted Average Cost of Capital for the company.
• Develop values for the principal value drivers identified by Rappaport (1986) in his Shareholder Value Analysis model using reasonable assumptions and in the light of available information.
• Develop a Shareholder Value Analysis (SVA) model for Vestas using Excel and applying the value drivers you have developed.
• Use Excel to show the effect of changes in key assumptions in the model and discuss these.
• Discuss the difficulties in applying SVA in practice. [50 marks]
2. How might activity-based costing be expected to contribute to enhancing shareholder wealth? Provide a rationale for why you think a company such as Vestas might or might not make use of activity-based costing. [25 marks]
3. Comment on Vestas’ dividend policy in the context of financial theory. Link your discussion to your analysis in part one where appropriate. [25 marks]

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