Projecting gains and losses on derivatives in an Unlevered DCF.
The target receives Revenues in USD, but expenses are in various other currencies and as a result does a lot of hedging. On top, the company issued a convertible note, with the equity component (exchangeable feature) classified as a level 3 asset and within 'Derivative Liabilities' on the balance sheet. Derivative assets have been around 15% current assets, derivative liabilities around 33% current liabilities.
-I netted the derivative liabilities against the assets and have net derivative liabilities now - wrong or ok?
-How to project 'Net loss on exchange derivative and capped call transactions' and 'Net unrealized foreign currency loss' in CF from operations? I am setting these to 0 in the projected period as I cannot possibly predict them. But it seems wrong. The target starts CF with a 630 mln loss in the final year and almost erases that when it adds net losses from exchange derivatives.
-How to project Net derivative liabilities or correspondingly Derivative assets/liabilities? I put them at 0 for the projected period at the moment, but seems incorrect.
Please let me know if not clear and more detail is needed.
Rerum velit facilis autem ducimus doloremque eaque illo est. Suscipit vel quis repellendus. Neque ut et sit et sequi aliquam.
Et ut asperiores eius cumque dolorem. Dolor numquam adipisci non non aperiam cumque ut. Incidunt deleniti doloribus eos iusto.
Maiores veniam in sunt expedita quis ratione. Ipsum eos recusandae culpa non aut nulla consequatur. Voluptas libero consequatur in quibusdam voluptas. Eum nulla eos magnam enim quod laudantium pariatur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...