Mruszczy: NEED LOGOS

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Introduction. Fundamental or intrinsic value Operational value (?going concern") not breakup valueComplex and time-consuming valuation method Show insights into value drivers and the market's implicit assumptionsUseful when multiples are not appropriate or feasible. How will we do this?. Calc

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Mruszczy: NEED LOGOS

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2. Introduction

3. How will we do this?

4. How will we do this?

5. Free Cash Flow

6. Free Cash Flow

7. Net Income vs. Free Cash Flow

8. Forecasting Free Cash Flow

9. Forecasting Free Cash Flow

10. Forecasting Free Cash Flow

11. Explicit Period vs. Terminal Period

12. Discount Rate Use a discount rate to apply time value of money A dollar tomorrow isn’t worth as much as a dollar today Discount rate you choose is directly related to risk level of the company Reflects the required rate of return Weighted Average Cost of Capital Made up of Cost of Debt and Cost of Equity

13. Cost of Equity Capital Asset Pricing Model (CAPM) Risk free rate + Risk Premium Risk free rate Use 10 year government bond yield to maturity for the country where the majority of the cash flow occur If uncertain, use US Treasury rates Risk Premium Beta*(Market return – Risk free rate) Beta: how volatile is the company’s stock in comparison to the overall market?

14. Cost of Debt

15. Weight of Debt and Equity The weights in WACC should reflect the target capital structure The weights in WACC should be calculated based on market value of equity and debt Multiply the cost of debt and cost of equity to their respective weights

16. Enterprise Value

17. Enterprise Value

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