Valuation Flashcards by Korbinian Gabriel

Flashcards in Valuation Deck (7)

Loading flashcards...

Define valuation

valuation is an objective search for true fundamental value

All valuations are biased
The simpler, the better

Name reasons for valuation

M&A
Partnerships (VC, IPO etc.)
Taxation
Valuation of investments
Performance measurement

Enterprise value

Asset = Equity + Debt

How do you calculate the enterprise value?

Estimate FCFF (Cash flow, as if 100% equity financed)
Calculate firms cost of capital and take Tax shield into account

WACC: Account for Tax shield in the CoC —> Discount FCFF with WACC
APV: Add PV(Tax shield) to the PV(all equity firm)

What is important when using FCFF

100% equity
No sunk costs, but opportunity costs
Use expected cash flow

Use income statement and balance sheet information to derive FCFF

FCFF Formula

FCFF = EBIT (1-t) + D&A + CAPX + ∆NWC

EBITDA = Sales - Cost of goods sold - Operating expenses

EBIT = EBITDA - D&A
EBIT = Net income + (real) taxes & interest expenses
EBIT = Revenues - cost - depreciation

∆NA = CAPX + ∆NWC - Depr.

Terminal value

Assumed that the cash flow reaches a steady state with constant growth

Valuation Flashcards Preview

Finanzen III > Valuation > Flashcards

Define valuation

valuation is an objective search for true fundamental value

All valuations are biased
The simpler, the better

Name reasons for valuation

M&A
Partnerships (VC, IPO etc.)
Taxation
Valuation of investments
Performance measurement

Enterprise value

Asset = Equity + Debt

How do you calculate the enterprise value?

Estimate FCFF (Cash flow, as if 100% equity financed)
Calculate firms cost of capital and take Tax shield into account

WACC: Account for Tax shield in the CoC —> Discount FCFF with WACC
APV: Add PV(Tax shield) to the PV(all equity firm)

What is important when using FCFF

100% equity
No sunk costs, but opportunity costs
Use expected cash flow

Use income statement and balance sheet information to derive FCFF

FCFF Formula

FCFF = EBIT (1-t) + D&A + CAPX + ∆NWC

EBITDA = Sales - Cost of goods sold - Operating expenses

EBIT = EBITDA - D&A
EBIT = Net income + (real) taxes & interest expenses
EBIT = Revenues - cost - depreciation

∆NA = CAPX + ∆NWC - Depr.

Terminal value

Assumed that the cash flow reaches a steady state with constant growth

Decks in Finanzen III Class (1):

Key Links

Subjects

Company

Find Us

Brainscape's Knowledge GenomeTM

Valuation Flashcards Preview

Finanzen III > Valuation > Flashcards

Define valuation

valuation is an objective search for true fundamental valueAll valuations are biasedThe simpler, the better

Name reasons for valuation

M&APartnerships (VC, IPO etc.)TaxationValuation of investmentsPerformance measurement

Enterprise value

Asset = Equity + Debt

How do you calculate the enterprise value?

Estimate FCFF (Cash flow, as if 100% equity financed)Calculate firms cost of capital and take Tax shield into accountWACC: Account for Tax shield in the CoC —> Discount FCFF with WACCAPV: Add PV(Tax shield) to the PV(all equity firm)

What is important when using FCFF

100% equityNo sunk costs, but opportunity costsUse expected cash flowUse income statement and balance sheet information to derive FCFF

FCFF Formula

FCFF = EBIT (1-t) + D&A + CAPX + ∆NWC EBITDA = Sales - Cost of goods sold - Operating expenses EBIT = EBITDA - D&AEBIT = Net income + (real) taxes & interest expensesEBIT = Revenues - cost - depreciation∆NA = CAPX + ∆NWC - Depr.

Terminal value

Assumed that the cash flow reaches a steady state with constant growth

Key Links

Subjects

Company

Find Us

Brainscape's Knowledge Genome^TM

valuation is an objective search for true fundamental value

All valuations are biased
The simpler, the better

M&A
Partnerships (VC, IPO etc.)
Taxation
Valuation of investments
Performance measurement

Estimate FCFF (Cash flow, as if 100% equity financed)
Calculate firms cost of capital and take Tax shield into account

WACC: Account for Tax shield in the CoC —> Discount FCFF with WACC
APV: Add PV(Tax shield) to the PV(all equity firm)

100% equity
No sunk costs, but opportunity costs
Use expected cash flow

Use income statement and balance sheet information to derive FCFF

FCFF = EBIT (1-t) + D&A + CAPX + ∆NWC

EBITDA = Sales - Cost of goods sold - Operating expenses

EBIT = EBITDA - D&A
EBIT = Net income + (real) taxes & interest expenses
EBIT = Revenues - cost - depreciation

∆NA = CAPX + ∆NWC - Depr.