Tesco discounted cash flow model

Most distribution agreements require the distributor to resell the products strictly to end users. However, some distributors choose to resell those products to other resellers.

Tesco discounted cash flow model

Tesco discounted cash flow model

Longzhou Li Table of Contents 1. Introduction The purpose of this essay is to study the financial structure and situation for Tesco plc. First, there will be an overview of their capital structure and corporate governance mechanism.

Comparisons will be made between them. Secondly, there will be calculation for the expected return and beta of the stock for these three companies against the FTSE index in the last seven years.

Moreover, studies would be conducted for their diversification strategies and the impact of merger and acquisition cases within the seven years respectively. According to Hartthe corporate governance issues arise where there Tesco discounted cash flow model agency problems that mangers may not act in the best interest of shareholders.

There are many frameworks that firms can adopt to improve their corporate governance such as the principal- agent theory. It claims that manager needs to have performance-related rewards in forms of stock options or shares.

Tesco discounted cash flow model

As Fama and Miller pointed out, the agency cost can determine the capital structure of the company. The UK government has set out corporate governance code for business to comply with.

It has principles such as directors should have long-term performance related pay, which should be disclosed in the company accounts and contracts renewable each year. The latest version which was published in requests companies to put external audit contract out to tender at least 2 every ten years.

These practices can increase the transparency of the management and avoid some misconduct of the managers.


First and foremost, an effective board is always the cornerstone for good governance in any corporation. Moreover, they have a very comprehensive governance structure according to Figure 1.

Tesco corporate governance structure. Tesco annual report figure one. There are four committees to support the work for the board of directors and ensure they are working towards the best interest for the shareholders.

Moreover, the sub-committees chaired by the CEO are in charge of monitoring each aspect of the business and escalate important issues for discussions of the executives.

For Morrison, they have frequent board training as well to ensure that board of directors understands the core issues and the changing environment or regulation. The large shareholders are one of the important parts for corporate governance. These major shareholders have voting right and a say in decision making.

These policies will have a big impact on their capital structure as the executive management will occupy a certain percentage of all the shares.

On the other hand, Morrison has many mechanisms such as bonus based on objectives, profit and scorecard to link their executive compensation with the profit before tax. Morrison annual report 4 Tesco also has governance policies regarding risk management.

According to figure 2, they have They finance their operation or projects through multiple sources, such as debt, retained profit and share issuing etc. Meanwhile, they maintained their credit rating by keeping a relative low debt ratio.

According to Facciodebt can also constrain the dispersed shareholders by managers. These policies all have an impact on their capital structure. The Associated Figure 3. Tesco capital structure Source: Associated British Food debt structure.

FAME total liability is around According to Wang and Xiethe well-run run acquirers can create more value by acquiring a poorly poorly-run run target than other acquisition. The model is used to calculate the appropriate rate of return for an individual asset. The equation is shown as follows, To calculate the Expected return, the first step is to calculate the systematic risk, beta.For Galactic’s business model, Virgin followed a well-worn route.

The brand is valued on a discounted cash flow basis at roughly £1bn, and it thus accounts for a significant proportion of. • Retail operating cash flow: This is the operating cash flow of continuing operations, excluding the effects of Tesco Bank's cash flows.

• Retail free cash flow: Retail free cash flow includes all cash flows from operating and investing activities for the Retail business, and the market purchase of shares in relation to share schemes.

Estimating the intrinsic value of Tesco PLC (LSE:TSCO) – Simply Wall St News

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Tesco PLC Intrinsic Value: DCF (FCF Based) (TSCDY)