Dcf Models Essay

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Technical Notes Valuation 1) How would you value a company a. DCF i. Best intrinsic value of a company ii. Done whenever you are valuing a company iii. Forecast future fcf of a company till the terminal year, then discount back to net present value using an appropriate rate and the present value of the terminal value of the company b. Market Comparables iv. Used when you want to determine if a company is undervalued or overvalued compared to its peer group based on various multiples v. How a private company might trade in the public markets, or as a benchmark for the private company in a merger vi. Can be used to establish a breakup value for a conglomerate by analyzing each segment’s individual value c. Past Precedent Transactions vii. Used to see how much acquirers recently paid for a similar business d. LBO viii. Looks at what a financial sponsor could pay considering a target IRR and the debt capacity of the firm ix. Usually 70% debt x. 20-25 rate of return hurdle xi. What kind of return can you get xii. What is the debt capacity xiii. Ability to pay-how much equity 2) Additional Valuations e. Trading Range xiv. Range the stock has been trading in during the past 52 weeks f. Asset Value xv. Examines what you can sell the company’s assets for g. Merger Consequences Analysis xvi. A form of affordability analysis (what can an acquirer pay) rather than an analysis of the value of a target 3) Which of the valuations methods tend to lead to the highest valuation? h. Past Precedent Transaction xvii. Because it includes not only the stand alone value of the corporation, but the synergies that are expected from the transaction

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