Posts by: WST Expert 1
Re: Projecting minority interest
If MI is non-cash pay (true in the VAST majority of cases)... 1) Note that the MI expense on the IS tends to be negative 2) The MI liability account on the BS will go UP (IOU up) 3) YOU MUST have a corresponding entry on CF (CFO, not part of WC) That accounts for the change in MI balance on th... Read More
If MI is non-cash pay (true in the VAST majority of cases)... 1) Note that the MI expense on the IS tends to be negative 2) The MI liability account on the BS will go UP (IOU up) 3) YOU MUST have a corresponding entry on CF (CFO, not part of WC) That accounts for the change in MI balance on th... Read More
Re: WACC for private company
A private company certainly has a cost of equity - it just requires a bit more work to quantify via CAPM given there is no public stock information. All forms of capital must be incorporated in WACC analysis. Usually the question is if a private company has no debt, is WACC simply its cost of equity... Read More
A private company certainly has a cost of equity - it just requires a bit more work to quantify via CAPM given there is no public stock information. All forms of capital must be incorporated in WACC analysis. Usually the question is if a private company has no debt, is WACC simply its cost of equity... Read More
Re: One time items?
The easiest way to answer this question is to ask yourself if these items will recur again in the future. For Gain/Loss on Sale of Assets, generally we do not include since one does not dispose of assets every year. However, there are always exceptions - i.e. in one of our case studies, Goodyear, th... Read More
The easiest way to answer this question is to ask yourself if these items will recur again in the future. For Gain/Loss on Sale of Assets, generally we do not include since one does not dispose of assets every year. However, there are always exceptions - i.e. in one of our case studies, Goodyear, th... Read More
Re: Capital and Operating Leases
In short, we do not want you to include leases (both capital and operating leases) in your TEV calculation. Thus, in theory one would actually want to adjust out capital leases from debt figures on the BS. For a full robust discussion of this, please refer to our Private Company Valuation course (wh... Read More
In short, we do not want you to include leases (both capital and operating leases) in your TEV calculation. Thus, in theory one would actually want to adjust out capital leases from debt figures on the BS. For a full robust discussion of this, please refer to our Private Company Valuation course (wh... Read More
Re: Unlevered Free Cash flows vs. Tax Effected Ebit as starting point for Gordon Growth Method
Actually this is covered in our Corporate Valuation course. In short, the run-rate, normalized FCFF figure is Tax-Effected EBIT because in the long run, depreciation and CapEx cancel out for a slow growth, mature, cash cow business. If the company doesn't fit that profile then, perpetuity growth met... Read More
Actually this is covered in our Corporate Valuation course. In short, the run-rate, normalized FCFF figure is Tax-Effected EBIT because in the long run, depreciation and CapEx cancel out for a slow growth, mature, cash cow business. If the company doesn't fit that profile then, perpetuity growth met... Read More
Re: Weighting trading multiples
We never recommend that you weight the multiples. We would simply include the other 3 companies as "reference" but not place much significance to the 3 when developing your actual reference ranges. When you don't have enough direct comps, you are stuck. For instance, in our corporate valuation cours... Read More
We never recommend that you weight the multiples. We would simply include the other 3 companies as "reference" but not place much significance to the 3 when developing your actual reference ranges. When you don't have enough direct comps, you are stuck. For instance, in our corporate valuation cours... Read More
Re: Implied statement of cash flows vs. actual statement of cash flows
The process that we went through in the class is for future projections, not historical. Since we can only use available information that we have access to at the time that we are building the model, for future projections, we have no choice but to assume zero non-cash items in the future. Historica... Read More
The process that we went through in the class is for future projections, not historical. Since we can only use available information that we have access to at the time that we are building the model, for future projections, we have no choice but to assume zero non-cash items in the future. Historica... Read More
Re: Target D/E Ratio for WACC
Perhaps the easiest bet would be to spread comps - see the current D/E ratios for its competitors. This is actually covered in our Private Company Valuation courses - what to do when you have no beta or WACC - which also applies to bottoms-up construction of WACC for a public entity. See here for mo... Read More
Perhaps the easiest bet would be to spread comps - see the current D/E ratios for its competitors. This is actually covered in our Private Company Valuation courses - what to do when you have no beta or WACC - which also applies to bottoms-up construction of WACC for a public entity. See here for mo... Read More
Re: Restricted Stock Units/Equity Compensation Plans
RSU's are not treated as options because they are (usually) outright grants that will increase shares outstanding 1 for 1, as opposed to options or warrants that have a strike price. Once the RSU is exercisable (vesting period over), then they are added to Basic Shares Outstanding for the purposes o... Read More
RSU's are not treated as options because they are (usually) outright grants that will increase shares outstanding 1 for 1, as opposed to options or warrants that have a strike price. Once the RSU is exercisable (vesting period over), then they are added to Basic Shares Outstanding for the purposes o... Read More
Minimum cash balance is considered a source of fund, since you are using your excess cash as a source of funds in the deal. To calculate excess cash, we take existing cash balance and subtract out the minimum requirement. This is covered extensively in our LBO modeling course - sounds like you need ... Minimum cash balance is considered a source of fund, since you are using your excess cash as a source of funds in the deal. To calculate excess cash, we take existing cash balance and subtract out the minimum requirement. This is covered extensively in our LBO modeling course - sounds like you need a refresher! Read More