Halma Plc (Financial Analysis)

1. Halma Plc

1. buy tech company in Health and Safety Sphere
1. skillful at bringing in underutilized tech companies
2. winds down and disposes of ineffective old tech 
2. bring together technology from different companies
1. fill "white space"
3. leverage government regulations
4. 80 subsidiaries
5. diversified, lower risk
2.  Financials* (these are in error as stated in lecture by DH)
1. ESTA: 105.9->111.3
2. CUVI: 290->498 (increasing more, implies a Conceptual Company)
1. working intangibles harder to increase their value
2. good news from an investors point of view, particularly if the technology is in an early stage
3. GOV: 234.6->27 (how is this calculated?)
4. NVP: (36.6)->(50.7)
5. M CAP: 593.8 ->585.6 
3. Required rate of return (look at previous returns to equity for a utility for example)
1. the equity holdings in a utility (Not Enron!) have returned 7%
2. for higher risk intangible assets 9%
3. use this for a return on equity number
4. HW: look at Halma's financials 
5. How to solve for current value of a perpetuity (Reference: http://www.tvmcalcs.com/calculators/baiiplus/baiiplus_page2)
1. Occasionally, we have to deal with annuities that pay forever (at least theoretically) instead of for a finite period of time. This type of cash flow is known as a perpetuity (perpetual annuity, sometimes called an infinite annuity). The problem is that the BAII Plus has no way to specify an infinite number of periods using the N key.
   Calculating the present value of a perpetuity using a formula is easy enough: Just divide the payment per period by the interest rate per period. In our example, the payment is $1,000 per year and the interest rate is 9% annually. Therefore, if that was a perpetuity, the present value would be:
   
   $11,111.11 = 1,000 ÷ 0.09
   If you can't remember that formula, you can "trick" the calculator into getting the correct answer. The trick involves the fact that the present value of a cash flow far enough into the future (way into the future) is going to be approximately $0. Therefore, beyond some future point in time the cash flows no longer add anything to the present value. So, if we specify a suitably large number of payments, we can get a very close approximation (in the limit it will be exact) to a perpetuity.
   Let's try this with our perpetuity. Enter 500 into N (that will always be a large enough number of periods), 9 into I/Y, and 1000 into PMT. Now press CPT PV and you will get $11,111.11 as your answer.
   Please note that there is no such thing as the future value of a perpetuity because the cash flows never end (period infinity never arrives).
   Please continue on to part III of this tutorial to learn about uneven cash flow streams, net present value, internal rate of return, and modified internal rate of return.