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Valuation of merged firm
Hi, everybody! I am trying to do a case of merged Bulgari valuation. Here is what I think basically: 1. to use DCF to calculate FCFF in 5 years based on preceding 3 years FCFF 2. Then to calculate WACC for the next 5 year. 3. finally to apply P=∑(FCFF_1)/(1+WACC)^1...
If a company is expected to perform very well/poor in the future, how is this reflected in the DCF model?
My guess is that the WACC would change, leading to a higher or lower discount. But I'm not 100% sure because the DCF is a measure of the intrinsic value of a business. Merci!
If a company expects a company to do very very well or very poorly in the upcoming months, how is this reflected in the DCF ?
For trading comps , it'd be reflected in the fact that the EV would either be very high or low depending on investor sentiment. But because DCF is solely based on intrinsic valuation, is investor sentiment reflected at all in the valuation? Wouldn' t the WACC change? (e.g. if a company is expected...
How to determine FCF growth rate (perpetuity growth method)
How do I calculate a growth rate for free cash flows in the terminal period?
Is an integrated financial model necessary for forecasting financials & valuation?
Hi Is an integrated three statement model necessary for forecasting and valuing a company? I have a hedge fund interview and need a DCF model. Is not not possible to forecast unlevered free cash flow using: tax-affected EBIT, add capex, change in working capital, and D&A. Then once you discount...
How to account for principal payments in a dcf?
If a company is paying off a significant amount of debt one year, how would you account for this in a DCF ? Or would you at all? M&I gives such a confusing answer to this question so I am totally lost.. Thank you for all the help
Why can't you use private companies as part of your public company comperables analysis?
I understand that it wouldn't make sense to use a private company in your calc of cost of eq or wacc BC private companies don't have values for market cap or beta, but why couldn't you use private companies in public comps ? Is it just because it's literally called "public" comps? Thanks in advance
How does revenue impact a company's DCF valuation?
How might a 10% change in revenue impact a DCF valuation? I mean, step by step, where does it flow through?
The Theory Behind The Terminal Multiple (Question)
So we all know that when performing a DCF there are two main methods to use when concluding on a terminal value, the Gordon Growth Model and the Terminal Multiple model. The Gordon Growth model is taking the FCF in the final year of the projection period, multiplying it by 1 plus the "constant...
Discounted Cashflow Valuations (DCF): Academic Exercise, Sales Pitch or Investor Tool?
In my last post , I noted that I will be teaching my valuation class , starting tomorrow (February 2, 2015). While the class looks at the whole range of valuation approaches, it is built around intrinsic valuation, reflecting my biases and investment philosophy. I have already received a few emails,...
URGENT! Financial Modelling & DCF Test - How to determine assumptions?
Might be the wrong section as its for a Private EQUITY gig however it more of an Investment Banking question. Bit of background. I was in Oil and Gas finance where the modelling is much different especially in assumptions where the data is much more streamlined and projections are worked on many...
The growing perpetuity calculation in DCF
Hey, guys. I am a pre-MBA student. I studied one corporate finance class in law school so my question may seem too plain and simple. I was reading the DCF and noted that the calculation of the terminal value is different from the formula I learned from class. The formula taught in our class is to...
What is something productive to learn while in high school? (Financial modeling)
I am bored, and I would like to play around with financial modeling. I found some great powerpoints and videos on DCF and DCF analysis, but I would like to know what else I could be learning in my free time. Links or suggested resources would be greatly appreciated. Many thanks and best regards,
DCF modelling question
I have seen several DCF models where on a column right after the forecast period of financials, they have a normalized growth column. Here they assume X% of growth, say 2% for revenue, and this number is linked to these forecasted revenue numbers so that at the end of the forecast period, the growth...
DCF Question -- Should Acquisitions be Included In Capex?
Hey Guys, Quick question on the DCF . After I have NOPAT and I add back D&A and changes to NWC, I was wondering if I need to subtract out just mtx. capex or growth capex as well including acquisitions? The firm that is being valued is very acquisitive and so my thinking is that if I assume its top...
How to find a property's intrinsic cap rate?
I am at an otherwise traditional PE / HF firm that is pretty much doing its first RE deal...so we are all new to this shabang. My boss wants me to find a way to get a property's intrinsic cap rate, as in he does not want to rely on market comparables or transaction data or anything. This means he...
DCF Terminology re: "Lever"
Are these short definitions correct? Unlevered FCF v. Levered FCF => Unlevered FCF includes interest/debt payment. Unlevered Beta v. Levered Beta => levered beta includes company interest/debt payment. I'm confused, because definition of levered seems "flipped" depending on whether you're talking...
DCF - % debt and % equity?
So I'm learning DCF and have a couple questions that I can't find solid answers to: 1 - during WACC calculation when we calculate % debt and % equity in capital structure we are supposed to use MV not BV for both right? For debt BV is a good proxy but for equity it has to be MV? 2 - I know that one...
Help with 10 year DCF (EXCEL ATTACHED)
I am trying to do a DCF valuation on DuPont, but my enterprise value is really small compared to the # of shares outstanding. I used a template off stockodo. Please lead me in the right direction. Thanks! I have a worksheet called "Discounted Cash Flow modified" - that sheet includes Net non-op L...
Valuation Methods in Industrial IBD group
Hi all, I am curious if anyone is aware of the common valuation multiples and methods common when valuing companies as an analyst within a bank's industrials group. Any info would be greatly appreciated. thx
Appropriate cost of equity for a start up?
I am looking to build out a DCF for a start up business which has 2 years of operating history and about $70,000 of LTM Revenues. Looking for seed funding. Any insights as to what would be an appropriate cost of equity? And if so why you chose that number?
Notes for Technical Interview Questions
During a recent round of interviews with several banks, headhunters sent across a number of potential technical questions that they said I should be very comfortable with. However, through all of my interviews I was never actually asked any technical questions (although I did do a 3 hour modelling...
Does DCF value account for all inventory?
I am currently valuing a company with a large inventory. I realize the DCF takes into account the changes in inventory in the working capital number, but what about the rest of the inventory that was not part of the change/just lying around? If I sell this company for the DCF value, do I separately...
Adjusted EBITDA in DCF Valuation?
Do we use an EBITDA figure that has been adjusted for one-time, non-recurring items in the DCF calculation? If not, where do these adjustments go? Much appreciated.
Marginal Tax Rate for Private S Corporation (DCF Question)?
Hi monkeys. I am not quite sure what tax rate to use for my DCF when calculating the cost of debt. Should I go ahead and tax-affect with a corporate tax rate of 35% or 0% because it's a pass-through entity? Any suggestions?
Rosenbaum DCF Valuation Temaplate
Anyone have the valuation Rosenbaum templates?
Industry Beta- 2004 Chinese Internet Industry
Hello, Could anyone perhaps give me some guidance as to how I could obtain the industry Beta of China's Internet industry in the 2003/2004 years? Thank you.
Interview next Tuesday (5/13)
WSO AMers, I could really use your help preparing for an upcoming interview. The challenge here is that I'm jumping industries from commercial banking to Asset Management so the relevant techniques I learned in school are a little rusty. The job description specifically mentioned DCF , APV, and...
Absolute approach with multiples
i usually tend to value companies on a catalyst/upside/downside scenario based approach and try to give a sense of the possible variation in % as i believe that, while time consuming, it is a pseudo solid way of not getting totally toasted by the investment experience. that being said,i've always...
Valuation tools survey: DCF vs Multiples
just out of curiosity, in real life, shops tend to use DCF , Multiples or a mix of both? i understand both of them have their shortcomings and that maybe especially in the Sell Side Multiples are preferred because it's much easier to give a simple answer to the client (given all the inputs a DCF...
How DCF accounts for assets value?
Could someone please explain or refer to the link on how DCF accounts for the value of assets? For example, when analyzing companies we can do FCF based perpetuity model and get the intrinsic value of the company. I am confused on how underlying assets of the company are treated in this case. Are...
Model won't balance. Any help?
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DCF - Include Debt Financed acquisitions?
Hi All, I am creating a DCF and had a relatively basic question. The Company plans to acquire another company in the forecast period and will raise an equivalent amount of debt to finance the transaction. Is this a wash? Should I increase CapEx by the amount of the acquisition, or not since it will...
DCF Model
I have never gone balls deep into a model before. Just curious, are there any specific sectors or industries where companies are easier to model than others?
Real Life Case Study: What is the value of this 4 Tenant Retail property in Long Island?
I have an associate who co-owns (50% undivided interest) a 4 tenant, Class B Retail property in a middle (to working) class Long Island residential area which generates $16,000 a month total NOI with NNN leases. The leases all have 5-10 years left to run with a good probability of renewal across the...
Change in NWC in Terminal Value
Hi, I was wondering how (or if) the change in NWC effects the Terminal Value. I understand that in a DCF NWC has a slightly different definition (does not include Cash and short term debt). When calculating TV I dont include D&A and Capex (becasue they should zero out in the long run) - but...
DCF Taxes
quick question: when I do DCF and trying to figure out FCF should I go with taxes that were actually paid or taxes that should have been paid for each corresponding period in the past? Thanks a lot!
Taxes Issue in a DCF
I am looking at a company that generated losses for past few years, mainly due to extremely high interest expense and deteriorating macroeconomic forces. Even though it is generating a net loss overall, it still pays cash taxes in certain jurisdictions and abroad.
How to DCF like a rock star
Stock-based compensation and free cash flow
In Joshua Rosenbaum 's Investment Banking, free cash flow is calculated as: EBIT(1-t) + D&A - Capex - Increase/(Decrease) in NWC. Most sources present the formula for free cash flow this way, without any mention of stock based compensation. However, in the Breaking into Wall Street modules,...
Help wanted ASAP on projections model!
Hey WSO , I'm having some difficulty with a projections model that I need to finish work on by tonight. If any experienced monkeys are willing to help this noobacabra with fixing some messed up debt schedules and whatnot, let me know. Will trade for SB's and goodwill (haha, puns). Thanks everyone....
How to Get to ARGUS Certification?
Now that there's a dedicated RE forum I feel like we should have an Argus thread. Argus website here: Argus Software I've talked to a few people in the industry over the past week and they have stressed how important an Argus certification will be to break in straight from undergrad. Being a student...
DCF Analysis Q
Self teaching myself DCF analysis and trying to wrap my head around the concept of: Why does DCF = Enterprise Value? I have a hazy feeling it has something to do with net present value (maybe), but I'm not entirely sure. Any clarification is greatly appreciated to this dumb monkey.
DCF Question - What would the discount period be?
When doing a DCF for a company with an April 30 fiscal year end, and applying the mid-year convention, what would the discount period be (given that it's currently February)?
Valuation derivatives instruments
I'm doing a DCF calculation but how can I forecast financial derivatives? It currently has a fair value of -100. And -50 of this fair value expires next year, and -50 expires the year thereafter. How can I forecast this, can I just discount the -50 cash outflows? Thanks.
Pitch Book Practice
Ok guys, I'm looking to practice writing pitch books. Primarily Sell-side. I've searched the forums/M&I and have found some useful pitch book examples and 'templates'. My question is though, how to you practise creating them? Would you suggest using past M&A transactions or completely starting from...
DCF Question - How long does it take to learn?
Quick question--how long does it take to learn dcf on your own? This is under the assumption that the person doesn't know the accounting behind it. How long will it take to learn the accounting behind it + dcf itself? How many hours should I study per day if I want to know how to do it by the...
DDM and Residual Income Model vs. DCF
Why do you use DDM and Residual income models instead of DCf for banks? Thanks.
NEED GENIUS HERE -COME QUICK
say, this segment of a company is expected to produce -100K cash flow till perpetuity how do i discount it? discounting negative value makes no sense eg, if my cost of capital was 10% i would have a PV of -1M if my cost of capital was 50% i would have a PV of -0.2M clearly this does not make sense,...
What is excluded from current liabilities when calculating NWC for DCF
I'm doing a DCF project right now and I'm trying to figure out what I should exclude from current liabilities. Current Liabilities: Accounts payable Accrued compensation and related costs Accrued occupancy costs Accrued taxes Insurance reserves Other accrued liabilities Deferred revenue This is...
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