Beruflich Dokumente
Kultur Dokumente
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NOPLAT
Net Investment
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Net Investment = (NFA + NWC) at end of year - (NFA + NWC) at beginning of year Non- Operating FCF : to be considered after adjusting for taxes
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Capital turnover
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Continuing/ Terminal value Typically, terminal value is the dominant component in a companys value. Hence it should be estimated carefully and realistically. 2 steps in estimating continuing value Choose appropriate method Estimate evaluation parameters and calculate continuing value
Choose appropriate method : Cash Flow Methods : Growing free cash flow perpetuity method; Value driver method Non-cash flow methods Replacement cost method, Price PBIT method, Market to book ratio method
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Value Driver method : uses the growing free cash flow perpetuity formula but expresses it in terms of value drivers as follows CVT = NOPLAT
T+1
(1-g/r) / (WACC g)
NOPLATT+1 = expected NOPLAT for the first year after the explicit forecast period WACC = constant growth rate of NOPLAT after the explicit forecast period r = expected rate of return on net new investment
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Assume also that the cost of equity is 13.625% and the firm can borrow long term at 10%. (The tax rate for the firm is 50%.)
The current market value of equity is $1,073 and the value of debt outstanding is $800.
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Discounted Cash Flow Valuation: The Steps Estimate the discount rate or rates to use in the valuation Discount rate can be either a cost of equity (if doing equity valuation) or a cost of capital (if valuing the firm) Discount rate can be in nominal terms or real terms, depending upon whether the cash flows are nominal or real Discount rate can vary across time.
Estimate the current earnings and cash flows on the asset, to either equity investors (CF to Equity) or to all claimholders (CF to Firm) Estimate the future earnings and cash flows on the asset being valued, generally by estimating an expected growth rate in earnings. Estimate when the firm will reach stable growth and what characteristics (risk & cash flow) it will have when it does. Choose the right DCF model for this asset and value it.
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Understand how the various approaches compare Use at least two different approaches Work with a value range Go behind numbers Value flexibility Blend theory with judgment Avoid reverse financial engineering Beware of common pitfalls Control premia & non-marketability factor for partial interest and control add 20-60% as premium to pro-rata value of the firm and deduct non-marketability discount for minority stake without control rights
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