Valuation analysis

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FORD MOTOR CO. STOCK VALUATION By Instructor Institution City State Date All successful organizations owe part of their achievement to the presence of their shareholders. It is thus due to this reason that firms have a duty of care to ensure that shareholders’ value is increasing and they take part in sharing the improved performance of the organization. According to Farnandez (2007, 2), the creation of shareholders value occurs when long-term returns exceed the cost of capital. Depending on the market reception of the stock, the stock price can be undervalued or overvalued accordingly. It is, therefore, the focus of all businesses that through the creation of value, the stock price will follow suit leading to the creation of wealth (Shah, 2015, 4). It is essential that while businesses can meet the short-term needs of the stakeholders such as payment of dividends and wealth appreciation, they should also be able to sustain maximum shareholders value in the long run through employment of capital budgeting techniques, ensure accountability, corporate ethics, and proper corporate governance (Shah, 2015, 2). Ford Motor Co. is aware of this fact and as such has endeavored to constantly deliver quality and value improvement in the subsequent financial year with the stock trading at $12.43 by the close of business on January 1, 2016. Through stock valuation of a firm, investors can know if the business is a good investment option or not. Valuation is also important for financial reporting and planning (Chu, Chen, & Chiou, 2014, 15). A number of appraisal techniques can be applied in valuing Ford’s stock which include Economic Value Added (EVA), Total

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