Re: Marginal Interest Rate (A/D Analysis example)
The marginal interest rate is the marginal rate of borrowing, not the savings/treasury rate. The latter can be used for interest income rate, but not for debt borrowing in an M&A deal. We would use the weighted average YTM of existing debt of the acquiror as the best initial proxy.

Re: External File Links
Assuming all the cells in the BU tabs are what you want to pull in from, you can concatenate (via the ampersand, or & symbol) in conjunction with the INDIRECT function to get the references you need. Let us know if you need any more specific guidance -- if so, feel free to describe your data in a bi... Assuming all the cells in the BU tabs are what you want to pull in from, you can concatenate (via the ampersand, or & symbol) in conjunction with the INDIRECT function to get the references you need. Let us know if you need any more specific guidance -- if so, feel free to describe your data in a bit more detail! Read More

Re: Template of DCF
This section actually serves as a preview of the full course. If you enjoyed the Basic Financial Modeling free trial, we suggest you purchase a subscription. The standard duration is 6 months of video-on-demand access, while you get to download all supporting materials (including the Excel files) to... This section actually serves as a preview of the full course. If you enjoyed the Basic Financial Modeling free trial, we suggest you purchase a subscription. The standard duration is 6 months of video-on-demand access, while you get to download all supporting materials (including the Excel files) to keep.

We have a Labor Day promotion going on now for just a few weeks; now's the time to get any packages you're interested in at a discount! Read More

Re: ROIC
NOPAT is not meant to account for the tax shield on interest expense because it is pre-capital structure.

Re: ROIC
This is a great question and here we will take this opportunity to clarify for all ROC vs ROIC: ROC is Return on capital and meant to capture capital structure financial returns. It would be comparable to ROE and it IS supposed to include all stakeholders in the numerator as well: (Net Income... This is a great question and here we will take this opportunity to clarify for all ROC vs ROIC:

ROC is Return on capital and meant to capture capital structure financial returns.
It would be comparable to ROE and it IS supposed to include all stakeholders in the numerator as well:

(Net Income + Interest Expense) / (Debt + Equity)

Additional Clarifications:
- Do not subtract out dividends in the numerator: this is not a cash flow or IRR calculation per se
- Interest Expense is gross interest, do not include effects of interest income
- Both Debt and Equity in denominator are book value, not market values
- Denominator would be average capital, so average(Year 1 debt+equity, Year 2 debt+equity)

ROIC is Return on Invested Capital and meant to capture efficiency of its capital allocation.
As we discuss in class, do not rely on Investopedia definitions - they are flat out wrong.

ROIC formula =
NOPAT (Net Operating Profit After Tax, or in DCF language, Tax-Effected EBIT) divided by:
Net PPE + Net Intangibles + Net Working Capital

This would be more comparable to Asset Turnover (Sales/Assets) than ROE or ROC calculation.

Additional Clarifications:
- Use of NOPAT is similar to how ROA (NI / Assets) is technically not correct in that Assets are used to generate all CF, not just to Equity stakeholders and therefore, EBIT/Assets would be more appropriate but no one actually uses EBIT/Assets due to the over-emphasized importance on Equity returns
- In an ideal world, Invested Capital should also be average but people get lazy and use ending balance
- Net PPE is also known as Net Fixed Assets; depends on particular you want to be in including stuff like Construction in Progress
- Net PPE includes Land
- Net Working Capital, similar to a previous post of yours, does not include cash and debt, etc Read More