Table of Contents 1. Perspective analysis ………………………………………….2 2.1 Forecasting……………………………………………….2 2.2 Valuation …………………………………………………3 2.3 Sensitivity analysis……………………………………….4 2. Application……...…………………………………………….4 3.4 Challenges and opportunities…………………………..4 3.5 Recommendations……………………………………….5 Reference List…………………………………………………….6 Appendix………………………………………………………….7

1.Prospective Analysis

Based on the reformatting financial statement, this report will use the forecasting template designed by Nissim and Penman (2001) to forecast the future financial performance of David Jones. The valuation of the firm is provided subsequently and the underlying key assumptions are considered for sensitivity analysis.

1.1 Forecast on Future Finance Performance

This section explained the forecasting bases and detailed forecasts are illustrated in Table 1.

* Sales Growth
The sales revenue is expected to have an average growth of 3% in the forecasting years. Due to the overall macro-economic factors such as a decline in consumer confidence or an increase in household savings rates, DJS is unlikely to boost the sales growth rate. Although the company is reducing the price of the international stocks, as the company faces increased competition in online retailing, which has resulted in greater transparency of global pricing, there is a risk the price deductions will not be offset by higher volumes. (DJS Annual Report, 2013) However, DJS’s strong market position and the strategic initiatives being implemented will push the growth rate back to positive and become stable in the later forecasting years.

* Asset Turnover
It is forecasted that ATO will tend to be continuously stable and maintain 2.0 during 2014 and 2018. This is based on the historical data, which shows a steady movement at 2.65 – 2.15.

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