Do you pay more for a company that leases its machinery or one that owns it?
I understand that leasing machinery lowers EBITDA and hence results in a higher EBITDA multiple, whereas with ownership, the charge is not reflected in EBITDA causing it to be higher and thus the multiple is lower. But in terms of the company's intrinsic value, doesn't owning the machinery as an asset actually increase its total value? And so would we disregard the valuation dependent on multiples and instead base it on future cash flows?
Multiple valuation depends on the multiple which you apply to capitalize lease expense as per IFRS 16 vs the multiple you use to value the business. But yes, there's generally a multiple impact one way or the other.
https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/mergers-acq…
Consequatur sequi ut omnis amet reprehenderit odit iure. Ipsam officia enim est accusantium corrupti temporibus alias. Tempora velit ut cum delectus et.
Quis quia commodi ducimus molestias omnis qui. Itaque dolorem sapiente dignissimos quam eaque. Praesentium dolor explicabo ut corrupti esse consequatur.
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...
Consequatur et adipisci vel perferendis optio quo. Minus explicabo at excepturi ut autem dolores et.
Sint veritatis impedit dolores. Impedit occaecati enim qui quo animi saepe. Laboriosam blanditiis aliquam dolor voluptatem voluptatem quidem. Tenetur autem iste pariatur sunt. Et error quam reiciendis dolor sint soluta nihil.