Volkswagen AG: Valuation in 2009 (A)

The purpose of this case is to introduce two of the most basic and used valuation techniques: dividend discount model (DDM) and multiples valuation. Students are required to value Volkswagen AG in the context of its merger agreement with Porsche and a major economic crisis that strongly affected the car industry. This case is designed for use at the beginning of a standard MBA Corporate Finance course, but can also be placed in any valuation module or as a stand-alone case. The students only have to be familiarized with the concept of cost of capital before preparing for this case. It provides enough data to discuss several versions of the DDM, such as the one-stage growth model, the two-stage growth model, and growth models with terminal price. It also allows comparison of several multiples, such as P/E ratios and EV/EBITDA ratios, to value firms.