Valuation Concepts!

Folks,

I wanted to start by saying you are doing a > wonderful job.  I have some questions below and would really > appreciate your response: > > 1) Private Company Valuation:  In order to calculate for a private company, the Cost of Debt > and Cost of Equity for WACC has to be calculated. I know you can use > comparable companies to do but what is the exact way? if I have all > the information for the private company (such as financials and annual > reports and forecasts).  How do we calculate it from the sources i > have provided you? > > 2) In a IPO scenario,  if a company is trying raise $600 million and > the EV value of the company is $ 2B. >           a) How many shares would a company have to issue for the > $600m ? What is formula or the approach to figure out the number of > shares issued? >            b) where  will these 600m will be show in the financial > model in the foretasted? >            c) Should the expenses of issuing equity should be added > in the WACC i.e. cost of equity expenses > > 3) Working Capital: > >     When Projecting working capital: Should all the items which are > in short term financing should be projected? >       If the WC is increased, add and vice versa? >       Is there a problem if the change in WC is always negative? > > > 4) CAPEX: > > As the Capex is projected for future.  The increase or decreased in > CAPEX should be deducted for FCFF purposes. What happens if the change > is Capex is negative, Shall we deduct that still? Because if you > deduct that it turn in to positive in the FCFF calculation.  For > Example. Change in Capex is -350 for 2010Y. and if i deduct the value > turns  positive it would have a different number?  What should we do > for this? > > 5) EV > > Enterprise value = > common equity at market value > + debt at market value > + minority interest at market value, if any > – associate company at market value, if any > + preferred equity at market value > – cash and cash-equivalents. > > Regarding EV, if I am calculating for a firm as per 2011 value. >  Assuming all the Debt are loans. Should I take the number of 2011 > Debt( Long term and short)? i.e. All the liabilities? > > 5) Terminal Value: > I have noticed Terminal value is always bigger than the PV of FCF? is > that normal? If PV of FCF is bigger what does that mean? > > 6) PE transactions: > > When PE companies pay 30% for private company with control premium. > > For Example > > PE Co buys 30% of Company Xyz $300million > > with the control premium means? that the value was originally > $280million and had to pay $20million extra to get the controlling > effect? > How do the Bankers come up with the premium number? > > Thank You,

P.S. Apologies for any grammatical mistakes..

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