When calculating share prices using different cases in a DCF- upside, base, downside case, I came across something called management case and sponsor case, could someone elaborate on what it is? I couldn’t seem to find much information. Thanks in advance for helping!
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So in your DCF each "case" has different sets of assumptions for sales growth, capex, and other DCF items. Your bank's internal assumptions would be the data in your high/low/base case. The management case would be drawn from assumptions given to you by management; usually they're more aggressive since management wants as high a valuation as possible and they're usually more optimistic. The sponsor case would be drawn from assumptions a financial sponsor (i.e. private equity firm) would use; they would be way more conservative as the sponsor wants to pay as little as possible.
Thank you so much, so would you say this is reasonable-
Management case= upside case + 2%
Sponsor Case = Downside -1%*?
*-1% because, I already have a negative NPV but positive IRR.
Other post gotchu.
What I wanna know is how this can be an urgent question…
Well, this is a financial modelling course assignment due on Sunday, that my uni has started and the lecturers- 2 of them are really nice and I actually admire what they have done in their lives and want to do well in their course. One of them is an ex-BB MD, quit 2 yrs in after being an MD because one of his interns didn’t know how to calculate WACC, but could lay down the formula and calculate it if given a uni problem. Looking at that he said “this is fucked”(story he told as an icebreaker in the class)lmao, came to my uni and said he’ll teach with a lecturer that has been teaching for quite a while. Works part-time and only teaches this course and consults a boutique PE firm here as an advisor. Plus, my gpa, I am not kidding here is 3.69/4.00 and want it to go up to atleast 3.8, and have gotten 50/50 in this course till now, if I ace this assignment, I’m close to 3.8/4.00. The other lecturer was a HF Analyst, came back to do his PHD and decided to teach.
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