Posts by: WST Expert 1
Re: Asset Acquisition: Customer Relationship
1) If EBIT is already negative, then why are you guys buying the business? Unless you have a plan to turn it positive. If so, I'd use those figures for your pro forma modeling. Of course, you still have to execute properly. 2) You can use after tax NPV is fine. Just that normally when referencing... Read More
1) If EBIT is already negative, then why are you guys buying the business? Unless you have a plan to turn it positive. If so, I'd use those figures for your pro forma modeling. Of course, you still have to execute properly. 2) You can use after tax NPV is fine. Just that normally when referencing... Read More
Re: Asset Acquisition: Customer Relationship
For valuation of customer list, it is typical to take the following high level steps, which normally follow FASB 141/142 (IFRS 3) for intangible valuation: - take the existing revenue derived from relationships - do NOT include additional future, as of yet unacquired customers - assume a reason... Read More
For valuation of customer list, it is typical to take the following high level steps, which normally follow FASB 141/142 (IFRS 3) for intangible valuation: - take the existing revenue derived from relationships - do NOT include additional future, as of yet unacquired customers - assume a reason... Read More
Re: Why is interest expense not added to pre-tax income?
Typically from an accounting perspective, interest on construction loans is not considered interest, it is considered part of cost basis. Regarding the permanent loan (i.e. mortgage), we were calculating everything on a pre-leverage basis, hence the exclusion of the mortgage interest. Indeed you wou... Read More
Typically from an accounting perspective, interest on construction loans is not considered interest, it is considered part of cost basis. Regarding the permanent loan (i.e. mortgage), we were calculating everything on a pre-leverage basis, hence the exclusion of the mortgage interest. Indeed you wou... Read More
Re: CapEx and capital lease
Yes, you are correct from a purely technical standpoint. However, keep in mind that such capital lease increases would be actually reflected in CFF, so the net impact is still properly reflected in the model. From an accounting debits and credits perceptive, capital lease liability on the BS would g... Read More
Yes, you are correct from a purely technical standpoint. However, keep in mind that such capital lease increases would be actually reflected in CFF, so the net impact is still properly reflected in the model. From an accounting debits and credits perceptive, capital lease liability on the BS would g... Read More
Re: FCFF - Unlevered Free Cash Flow
Please see response below to your other related query.
Thank you.
Please see response below to your other related query.
Thank you.
Re: FCFF (Unlevered Free Cash Flow)
Using DCF may not be the most appropriate valuation methodology if the company cannot sustain its required CapEx. Sounds like your company is in earlier stage growth mode, which DCF is not really applicable. Additionally, we would most definitely not recommend the FCFF formulas you referenced in ... Read More
Using DCF may not be the most appropriate valuation methodology if the company cannot sustain its required CapEx. Sounds like your company is in earlier stage growth mode, which DCF is not really applicable. Additionally, we would most definitely not recommend the FCFF formulas you referenced in ... Read More
Re: FCFF (Unlevered Free Cash Flow)
You're thinking of free cash flow to equity (FCFE), which would include the effect of net borrowing/repayment of debt. Instead, we typically calculate FCFF, which is computed before any effects of capital structure.
You're thinking of free cash flow to equity (FCFE), which would include the effect of net borrowing/repayment of debt. Instead, we typically calculate FCFF, which is computed before any effects of capital structure.
Re: Exit Transaction Fees & IRR/MOIC
Yes, because in theory the IRR is a cash-on-cash calculation. Your entry equity that the sponsor puts in includes the effect of fees and therefore so should your exit. Clearly, both of these would reduce final IRR. However, do note that it's not typically common practice in an LBO model to incorpora... Read More
Yes, because in theory the IRR is a cash-on-cash calculation. Your entry equity that the sponsor puts in includes the effect of fees and therefore so should your exit. Clearly, both of these would reduce final IRR. However, do note that it's not typically common practice in an LBO model to incorpora... Read More
Re: Beta Benchmark - Canada vs US
Purely for calculation of beta, you should use the country-specific index.
Nuances apply when calculating CAPM for WACC, which we cover in our Private Company Valuation course.
Purely for calculation of beta, you should use the country-specific index.
Nuances apply when calculating CAPM for WACC, which we cover in our Private Company Valuation course.
Please put the correct EPS.