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Flashcards in 02 Lecture Deck (17):
1

When do you use the Equity Approach

When valuing banks and investment firms

2

Which two approaches representing the DCF

- Entity Approach (WACC, APV)
- Equity Approach

3

How to calculate the Net Operating Profit after Taxes (NOPAT)

NOPAT = EBIT - Taxes

4

How to calculate the Free Cash Flow to Firm (Entity Approach)

NOPAT + Depreciations - Investments +- Change of Net Operation Working Capital

5

How to calculate the Net Income (NI)

NI = Earnings Before Taxes (EBT) - Taxes

6

How to calculate the Free Cash Flow to Equity (Equity Approach)

NI + Depreciations - Investments +- Change of Net Operation Working Capital - Cash flow to dept

7

What is the FCFE

The Free Cash Flow to Equity is the amount of money that can be distributed to equity holders

8

How to calculate the Total Entity Value (Firm Value)?

Value of operations (Enterprise Value) + Value of non-operating Assets (e.g. Cash Holdings)

V = V_op + V_nop

9

What is the lower and upper bound of g in the Gorden-Growth Formula

g has to be higher than the inflation rate
g has to be lower than the nominal GDP growth

10

Simplification of Market Value of Dept

Book value of dept.
Not a good assumption if the company is at default

11

In the DCF you only have to take ... liabilities into acount

interest bearing liabilities

12

Why is the Beta very noisy?

Depends on the
- time period
- sampling frequency
- market models
- etc

13

Why do Betas of companies need to be re-leveraged

- Company-specific leverage has large influence
- Beta with leverage of target company has to be calculated
- adjustment can be done via the WACC-formula

14

When does the circularity problem of the WACC arise

When you calculate the WACC of a company where the capital structure is given or a given debt value

15

What is the highest maturity you can use the Svensson-Method for?

30 years

16

What does the WACC Methode assume

That you have a constant capital structure

17

Which mulitples are used in practice for the multible methode?

- EV / Sales ( EV = Enterprise Value)
- EV / EBITDA
- EV / EBIT
- P / E