Net Working Capital - Valuation model
To any/all who can advise on a question I have regarding the following, I'd have much gratitude:
I am working out a Valuation model for a theoretical Steel MFG outfit, using a Free Cash Flow - NPV approach to find a value for the firm. I have mocked up financials, and only a small amount of information in the instructions to go off of.
My main issue: after applying the FCFF approach for Free Cash Flow (FCF = EBIT (1-tax) + Depreciation - Inv. in CapEx - Inv. in NWC), I am not sure about 2 things:
NWC: Net Working Capital: I understand this to be the change in Current Assets - Current Liabilities, however, I seem to get a different interpretation of 'Current Assets' depending on where you study it. Shall I include 'Cash' as a portion of Current Assets, considering the business in question is a Steel manufacturer?
Discount Rate: This firm is raising capital, and a VC is evaluating them, and the VC requires a 30% return... Can this be applied as the 'Discount Rate' in the model?
Thanks so Much to all.
I look forward to finally getting some clarification on this.
C.G. Hensel II