Accurate of MOIC estimation
Dear all, hi!
It will be great to hear your opinion about this topic. Thank you very much! :) Recently i've discussed with teammates topic about MOIC. Usually it estimates as (Dividends + NAV) / Commited capital.
But what if we agressivley pay lease payaments of our equipment. For example busisness equity 20% and debt (leasing) 80%. In our case all cash flows after expenses go to these lease payments.
1) Should we anyway estimate future return to these initial 20% equity? For example equity 200 th Debt (Lease) 800 th
Dividends 100$ = DVPI => 100th /200 th => 0.5 Net asset Value 200 th/ 200 th = 1
2) Or we should reestimate it taking into account agrgesivley lease payments? For example equity 200 th $ Debt (Lease) 800 th$. => will be in future equity, because of repayments
Dividends 100$ = DVPI => 100th /1000 th => 0.1 NAV changes due to the change of equity, will be 1 till the Net income will be higher and payments will not go to lease payments.
Thank you
Difficulties understanding your question. Let me rephrase: if I compare a company with owned assets with a company that leases all of its assest, how do I compare MOIC?
Company that owns the assets has to do capex and pay interest on the assets --> lease payments should not be significantly higher than these 2. These cash-outs also reduce ability to pay dividends.
In general, the way you finance your assets should not matter (much) for your valuation if you use a target leverage instead of current leverage. Value is in your ability to create operational profits with certain assets. The way you currently finance those assets should not have an impact in DCF and marginally in LBO.
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