Forum Search: capital markets
RE: 338(h)(10) elections and NOLs
1) Correct. Because I am selling you my stock, it is taxed at my respective individual level. My company isn't physically being touched or doing anything. Just a xfer of ownership. You, the acquiror, of course, will incur goodwill since you are buying my company. 2) A seller is motivated to do a ... Read More
1) Correct. Because I am selling you my stock, it is taxed at my respective individual level. My company isn't physically being touched or doing anything. Just a xfer of ownership. You, the acquiror, of course, will incur goodwill since you are buying my company. 2) A seller is motivated to do a ... Read More
RE: Treatment of Revolver as Debt for TEV
Assuming you are attempting to calculate equity value, there is no debate. Revolver is debt no matter how you slice it and is to be treated as such. Logic in this case: working capital is dollars tied up in the business. If the company is sold, there is usually a working cap requirement. How the... Read More
Assuming you are attempting to calculate equity value, there is no debate. Revolver is debt no matter how you slice it and is to be treated as such. Logic in this case: working capital is dollars tied up in the business. If the company is sold, there is usually a working cap requirement. How the... Read More
RE: Balance Sheet doesn't balance
The most common issue is adding balance sheet items that change and aren't added to the cash flow statement (working capital).
The most common issue is adding balance sheet items that change and aren't added to the cash flow statement (working capital).
RE: Create a simplified model from the full blown core model
Conversion from full blown Core Model to simplified, no debt model: 1) remove all Debt related items from Balance Sheet 2) remove Debt Sweep completely 3) in Cash Flow, CFF, there will be no stock or debt, just have one line called Capital Infusion (like CapEx) and set CFF equal to that. 4) Ch... Read More
Conversion from full blown Core Model to simplified, no debt model: 1) remove all Debt related items from Balance Sheet 2) remove Debt Sweep completely 3) in Cash Flow, CFF, there will be no stock or debt, just have one line called Capital Infusion (like CapEx) and set CFF equal to that. 4) Ch... Read More
RE: Correct Net Debt for TEV
The calculation of Net Debt for valuation purposes is a strict one - total debt - cash + minority interest. Total debt is all forms of interest bearing, negotiated securities, including short term, current portion, long term as well as preferred. Minority interest as well since it is considered ... Read More
The calculation of Net Debt for valuation purposes is a strict one - total debt - cash + minority interest. Total debt is all forms of interest bearing, negotiated securities, including short term, current portion, long term as well as preferred. Minority interest as well since it is considered ... Read More
RE: Tangible Book Value for Insurance Companies
Well the definition of TBV is book less intangibles. Traditionally that obviously doesn't include a prepaid asset like prepaid rent for instance. So don't minus out the DAC. Remember DAC is purely a GAAP term. Note however that a common valuation metric is price / premiums sort of like enterpris... Read More
Well the definition of TBV is book less intangibles. Traditionally that obviously doesn't include a prepaid asset like prepaid rent for instance. So don't minus out the DAC. Remember DAC is purely a GAAP term. Note however that a common valuation metric is price / premiums sort of like enterpris... Read More
RE: Correct benchmark for beta
Yes, generally speaking, use the beta for the national market. But the key is match apples and apples - you must use the appropriate market risk premium to make the beta make sense! So for your Dutch company, use: 1) beta vs. Dutch national benchmark 2) the market risk premium of above benchma... Read More
Yes, generally speaking, use the beta for the national market. But the key is match apples and apples - you must use the appropriate market risk premium to make the beta make sense! So for your Dutch company, use: 1) beta vs. Dutch national benchmark 2) the market risk premium of above benchma... Read More
RE: Deferred Acquisition Costs for Life Insurance Companies
the DAC as its called arises bc life insurers pay commissions upfront to brokers which obviously due to accrual accounting, matching principle must be amortized. Thus GAAP "underwriting income" is higher than Statutory underwriting income. Since for purposes of GAAP "EBITDA" and general ... Read More
the DAC as its called arises bc life insurers pay commissions upfront to brokers which obviously due to accrual accounting, matching principle must be amortized. Thus GAAP "underwriting income" is higher than Statutory underwriting income. Since for purposes of GAAP "EBITDA" and general ... Read More
RE: Levered vs. unlevered beta for cost of equity
In general we highly discourage the use of FCFE. See our valuation questions on the Ask the WST Expert link. You should always use levered beta to calc cost of equity. When using comps' beta, you first unlever beta then re-lever at target capital structure. Thus its a "normalized" levered industry b... Read More
In general we highly discourage the use of FCFE. See our valuation questions on the Ask the WST Expert link. You should always use levered beta to calc cost of equity. When using comps' beta, you first unlever beta then re-lever at target capital structure. Thus its a "normalized" levered industry b... Read More
Your question is a great one! Minority Interest treatment is summarized as follows: 1) In standalone valuation context, INCLUDE MI as part of TEV (Total Enterprise Value) because it is considered a form of capital since greater than 50% ownership forces consolidation 2) In credit analysis (... Your question is a great one!
Minority Interest treatment is summarized as follows:
1) In standalone valuation context, INCLUDE MI as part of TEV (Total Enterprise Value) because it is considered a form of capital since greater than 50% ownership forces consolidation
2) In credit analysis (leverage statistics and ratios), EXCLUDE MI b/c it is not considered a form of debt from banks/rating agency perspective and not a future claim like interest
3) In M&A and LBO analysis, you NEVER INCLUDE (that means EXCLUDE) MI in Sources & Uses b/c when you buy a company, you are buying its current structure. You are not buying out the minority shareholder that owns less than 50% of that subsidiary (of which you own greater than 50%). If you are buying out that minority shareholder to get 100% ownership (or whatever %age) then that is a separate transaction, typically modeled out right before the actual LBO.
For a video clip explanation of item #1 above, go to:
http://www.wstselfstudy.com
click on Free Video Clips and click on Corporate Valuation (TEV explanation)
or http://www.youtube.com/watch?v=taixlQP03Ps Read More