Trending Content - Investment Banking Forum
| +160 | As Lehman people reconvene at UBS, Barclays needs to hire (2023) | 23 | 13h |
| +131 | Is pay at BofA really that bad? | 63 | 5h |
| +90 | Day at Macquarie | 12 | 1d |
| +69 | Worlds Worst MDs Competition (2026 Edition) | 16 | 5s |
| +46 | How bad did I mess up | 10 | 1d |
| +45 | Is the life of a VP at a 'top-bank' really good? | 15 | 4d |
| +31 | Misrepresented Houston IB | 14 | 1d |
| +29 | No BB RO 2026 | 10 | 3d |
| +28 | JPM SMALL CAP or WF/JEF/RBC Coverage group | 13 | 1d |
| +24 | T(ouse)D Securities | 9 | 2d |
Career Resources
I guess you want to forecast the profit margin for the forecast horizon?
I mean it really depends, generally one could suspected that competitive advantages for companies erode over time thus converge to industry averages. Furthermore, you do want your terminal ROE to converge to the cost of capital in the terminal value (i.e. zero value spread) therefore margins, leverage, turnover should resemble ROE = cost of capital. But I guess it really depends on the company how long it takes for this to happen, consider industry life cycles, competitive position, industry growth etc. You just do not want to overestimate competitive advantages or have a too high terminal growth rate.
COGS: Typically I would say that they are linked to sales over gross profit margin. So I reckon you should rather think about your gross profit margin rather than forecasting COGS directly. SG&A: Similar to COGS; think about EBIT margin and what's the industry average.
Just my thoughts, of course open for other suggestions.
Thanks a lot. Just realized there were some typos. Sorry. Don't think much about the details you mentioned. As you mention, ideally the ROE will approach cost of capital.
Then I have another question: Are there any solid method to calculate the risk premium in the WACC? On modeling workshops, people simply pick a number in a large range, say 3-8%. Thank you.
Well, I guess you ought to determine the expected market return using the return of a broad market index, i.e. MSCI World (as you want to resemble the market of your shareholders, as your shareholders of a large-cap are usually globally distributed, you want to pick a very broad stock index). For the risk free rate I'd just pick the yield of a high quality long-term government bond (e.g. German 10y bond yield) and expand it to infinity (as we assume going-concern in our model).
Great explanations. Thank you!
Provident et impedit ut nemo cupiditate sit voluptate accusantium. Quaerat aut consequuntur recusandae. Molestiae qui cumque tempora repudiandae.
Ut soluta dolorem maxime amet unde accusamus. Dolores nesciunt quia consequuntur quo magnam et voluptatem. Dolor sint porro illo. Autem sit quo et vero ea sunt fuga. Cum est accusamus omnis quisquam.
Odio consequatur minus porro accusamus ut quas. Voluptatem aliquam eaque dolorum. Omnis omnis tempora repellendus ipsa facilis nihil nemo vel. Eum officia ratione ut alias laudantium incidunt. Cumque sunt explicabo culpa possimus sit labore.
Molestiae ipsa molestiae eos dolorum. Molestias est soluta nulla. Dignissimos consequuntur ex quis earum qui et ullam ex. Libero eum autem sint. A id et a in unde ea quia explicabo.
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...
Dolorem alias totam qui sint ut molestiae esse voluptas. Eos laboriosam perferendis suscipit iusto asperiores et. Quod consequatur accusantium et illum repellendus sint eius. Qui assumenda velit quo culpa ratione consequatur ut. Culpa aperiam est delectus suscipit ut ipsa. Consequatur laboriosam facilis quia ex eos beatae quia. Repellendus ut officiis quia sit voluptatem.
Minus voluptate temporibus et et hic quis. Blanditiis vero est distinctio animi quasi dolores.