WACC of a private company?
In this case, you should estimate the ideal target capital structure of your firm, primarily based on an average or "run-rate" capital structure based on comps. Many private companies have little to no debt so the WACC somtimes is the cost of equity in your calcuation. For a "normalized" WACC you ca... In this case, you should estimate the ideal target capital structure of your firm, primarily based on an average or "run-rate" capital structure based on comps. Many private companies have little to no debt so the WACC somtimes is the cost of equity in your calcuation. For a "normalized" WACC you can ues your comps average capital structure. Same for estimating the cost of debt for a private company (or any company) with no debt - use Bloomberg function FMC (or FOMC) to graph out spreads over Treasuries to estimate cost of debt. This is covered in our onlne Finance 101 course at www.wstselfstudy.com Read More

Modifying the Debt Sweep to Target a Debt/Capital Ratio
Hi - Can you help me figure out how to modify the Debt Sweep Schedule to target a specific debt/capital ratio? You explain this in your Credit & Leverage Statistics videos without an excel example. Could you provide an example in Excel?

Joseph

Corporate Valuation: Nuances on these methodologies
Hi there, I have a couple of doubts in relation to this module: (1). Could you please explain in more detail why capital leases are excluded (I watched that part twice and didn't really get it)? If we had a leasing finance (a credit line w/ a commercial bank) would we include it in the EV calc... Hi there,

I have a couple of doubts in relation to this module:

(1). Could you please explain in more detail why capital leases are excluded (I watched that part twice and didn't really get it)? If we had a leasing finance (a credit line w/ a commercial bank) would we include it in the EV calculation or not?

(2). Once PE is generally looked on a forward basis, I assume there should be no difference in calculating forward PE using Equity Value / Net Income and Price / EPS, since the diluted shares outstanding for the forecasted period would be calculated w/ today's share counting and effect of options using the today's share price (and not using WACSO). Does that logic make sense? (obviously here assuming no share repurchases going forward, them current share count = forecated share count, meaning Eq. Val / Net Income would be equal to Price / EPS).

(3). When applying the multiples from Deal Comps on the statistics of the company we are analysing, once I get to Equity Value should I divide this Eq. val. by the diluted shares O/S calculated using options excercisable or outstanding (since I have used options outstanding in arriving to the deal comps multiples in the selected deals)? And what about that when doing an LBO analysis (where you actually simulate a transaction), options outstanding or exercisable in the LBO analysis calculations?

(4). In the reference range, as we apply different multiples we will get to a series of Equity Value and consequently different implies prices per share. And my question is: is it appropriate to adjust the number of diluted shares O/S for each different multiple and implied new share price obtained in the reference range? If yes, how one would do that if we need our price per share to calculate our diluted shares O/S (and this same price per share is what we are trying to calculate)?

(5). Finally, should we include non-completed or only announced deals in our deal comps analysis? And why in deal comps we do not consider any forward multiples (only LTM)? Any specific reason here?

I appreciate your help in these questions.

Cheers Read More

RE: Corporate Valuation Methodologies: about the case study
1) The different diluted shares outstanding are calculated using a cumulative method of all your option tranches, something that is not in the scope of the courses unfortunately (nor that important honestly). 2) Tax shield on preferred is applicable IF the interest on preferred is tax deductible... 1) The different diluted shares outstanding are calculated using a cumulative method of all your option tranches, something that is not in the scope of the courses unfortunately (nor that important honestly).

2) Tax shield on preferred is applicable IF the interest on preferred is tax deductible (such as TOPrS, HITS, CRESTS, and other acronyms that effectively allow a company to deduct the preferred interest paid, something quite common). Since preferred is part of the capital structure, it is part of leverage of beta. Although it's not debt, it is a form of capital. The decision to include preferred inside or outside of the (1-T) depends on its tax deductibility.

3) The 4.5x to 5.0x range is a blended multiple of the entire company. You gross up overhead because if you had $10 less of expenses, your company value goes up by $50 (assuming 5x). Read More

RE: Advanced Valuation Modeling: Share repurchase
How would repurchasing shares be "returning capital back to shareholders"? Are you spending money to buy them back? And after you do buy them back, what good does it do to the existing shareholders (I'm assuming they're the owners of public stock and equity not issued to the public market, or am I w... How would repurchasing shares be "returning capital back to shareholders"? Are you spending money to buy them back? And after you do buy them back, what good does it do to the existing shareholders (I'm assuming they're the owners of public stock and equity not issued to the public market, or am I wrong here as well?) Read More