Dana Petroleum

Corporate Financial Management 2010 WELZ Wilfried Manchester Metropolitan University 13/12/2010 region A In reaction to the value of the hostile bid, the finance way has done a new valuation of the company (Appendix1). The thought period It bases its valuation on a time-period of 10 forms. One is able-bodied to choose this vast period because it is relevant for DANA Petroleum. Indeed the original return on equity of DANA is high (8, 71%) and leave alone confidence for the future. Moreover the oil industry is not rattling a dynamic industry. In other words, it is hard for petroleum Company to improve or diversify their production. They may evoke it for example greener or cheaper but the rate of change waistband very low. Consequently that is why the financial direction chooses a long time-period. Then one can also convey that the oil market is actually hard penetrating. It needs then having complex assets like platform in the sea and pipelines for example. It is especially the case for DANA because it principally extracts in North Sea. Finally this long time-period translate the fact that the area where DANA is based is a strong area in comparison to others countries like Iraq for example.

The difference amid ROIC and Cost of Capital Initially the difference between the ROIC and the embody of with child(p) of DANA is high (3,5%). This difference means that Dana creates value by earning a return on invested capital higher than the opportunity cost of capital. According to Damodaran, this situation results from the fact that Dana owns competitive advantages and there are barriers to entry into the market. The competitive advantages come from the fact that nowadays the general economy is based on oil especially for the merchant marine for example. The financial direction chooses a ROIC at 12% for contiguous years which seems in accordance with the past results of the company (except the year 2009 which was a bad year for the company) (Appendix 6) and the current politic of... If you motivation to get a full essay, order it on our website: Orderessay

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