Forum Search: capital markets
RE: Net Debt and Working Capital
Our accepted best practice is NOT to adjust Debt (whether Total or Net) for Working Capital as Working Capital is an operating related question not a capital structure, financing related item. Please note that that is in the context of STANDALONE valuation. The assumption is alwasy that there is eno... Read More
Our accepted best practice is NOT to adjust Debt (whether Total or Net) for Working Capital as Working Capital is an operating related question not a capital structure, financing related item. Please note that that is in the context of STANDALONE valuation. The assumption is alwasy that there is eno... Read More
RE: Deferred Maintenance Revenue treatment for TEV
Thank you for your inquiry. Normally speaking, TEV focuses only on capital structure and "sources of funds". In other words, it focuses on valuation of entities. However, your question focuses on a "working capital", "day-to-day operations" of the company as opposed to capital structure. Th... Read More
Thank you for your inquiry. Normally speaking, TEV focuses only on capital structure and "sources of funds". In other words, it focuses on valuation of entities. However, your question focuses on a "working capital", "day-to-day operations" of the company as opposed to capital structure. Th... Read More
RE: Deferred Maintenance Revenue treatment for TEV
This is definitelty akin to deferred revenue and unearned revenue (ie magazine subscriptions). Thus, not to be part of TEV and so the same answer - don't add or subtract. In the case of a merger, we would normally treat this as a closing adjustment due to working capital - that is, the buyer req... Read More
This is definitelty akin to deferred revenue and unearned revenue (ie magazine subscriptions). Thus, not to be part of TEV and so the same answer - don't add or subtract. In the case of a merger, we would normally treat this as a closing adjustment due to working capital - that is, the buyer req... Read More
RE: WACC tax rate adjustment for bea
Wacc is meant to capture marginal cost of capital. Effective tax rate and marginal (statutory) rates are not the same!
Wacc is meant to capture marginal cost of capital. Effective tax rate and marginal (statutory) rates are not the same!
RE: LBO enhanced model question
Summary Page a) The Illustrative Valuation box is meant for information only. The real key is the Sources & Uses of Funds. The Illustrative Valuation should be a snapshot of the current valuation of the entire company (even if less than 100% purchase). b) You can hard code the Equity Contrib... Read More
Summary Page a) The Illustrative Valuation box is meant for information only. The real key is the Sources & Uses of Funds. The Illustrative Valuation should be a snapshot of the current valuation of the entire company (even if less than 100% purchase). b) You can hard code the Equity Contrib... Read More
RE: TEV and negative net debt clarification
When we have more time in our longer courses, we go thru this simple explanation: If I buy your company for $100MM and there is $10MM of excess cash on the books, and you aren't allowed to touch it b/c you sold it to me, I have effectively paid a total of $100MM less $10MM b/c I take the cash and... Read More
When we have more time in our longer courses, we go thru this simple explanation: If I buy your company for $100MM and there is $10MM of excess cash on the books, and you aren't allowed to touch it b/c you sold it to me, I have effectively paid a total of $100MM less $10MM b/c I take the cash and... Read More
RE: Accounting: ROC
The "interest" used in Return on Capital formula is the "interest expense". Here is my explanation; Capital of the company will come either from the debt holders or the shareholders. As we are trying to find out the return on capital, we have to take into consideration the return for both t... Read More
The "interest" used in Return on Capital formula is the "interest expense". Here is my explanation; Capital of the company will come either from the debt holders or the shareholders. As we are trying to find out the return on capital, we have to take into consideration the return for both t... Read More
RE: Accounting: ROC
Add interest expense! The idea is that you calculate the returns that capita contributors receive. Net income goes to equity stakeholders and interest expense goes to debt holders, so the total return that all capital holders receive is net income + interest expense over equity+debt Join our ... Read More
Add interest expense! The idea is that you calculate the returns that capita contributors receive. Net income goes to equity stakeholders and interest expense goes to debt holders, so the total return that all capital holders receive is net income + interest expense over equity+debt Join our ... Read More
RE: Finance 101: DDM?
1) IRR will give you the rate of return on a series of cash flows. NPV will give you the net present value of a series of cash flows. IRR by definition is the rate that sets NPV to be zero. So the IRR of a cash flow series can be positive and NPV can be negative if the discount rate (an input into N... Read More
1) IRR will give you the rate of return on a series of cash flows. NPV will give you the net present value of a series of cash flows. IRR by definition is the rate that sets NPV to be zero. So the IRR of a cash flow series can be positive and NPV can be negative if the discount rate (an input into N... Read More
Keep in mind the bigger picture. You are using book depreciation because the difference between tax and ook depreciation can be thought of as a working capital change which is in change in working capital in fcff calculation. Although technically deferred tax liabilities (which is difference btwn bo... Keep in mind the bigger picture. You are using book depreciation because the difference between tax and ook depreciation can be thought of as a working capital change which is in change in working capital in fcff calculation. Although technically deferred tax liabilities (which is difference btwn book and tax depreciation) is not part of working capital, you may assume such item is included in working capital. If you want to get specific then why not add deferred compensation adjustments and the countless other items in cfo? Thus, fcff is surely an estimate, meant to capture the biggest items and the smaller items are either immaterial or a wash. If you know a specific item is large, take it on a case by case basis (ie acquistions potentially, etc).
So, don't kill too many brain cells over this one. For better or worse, it is what it is. Note that some ppl, specifically economic analysis do attempt to make such adjustments. Read More