Posts by: WST Expert 1
RE: Correct Net Debt for TEV
The calculation of Net Debt for valuation purposes is a strict one - total debt - cash + minority interest. Total debt is all forms of interest bearing, negotiated securities, including short term, current portion, long term as well as preferred. Minority interest as well since it is considered ... Read More
The calculation of Net Debt for valuation purposes is a strict one - total debt - cash + minority interest. Total debt is all forms of interest bearing, negotiated securities, including short term, current portion, long term as well as preferred. Minority interest as well since it is considered ... Read More
Re: Interest Schedule calcs
AHHHH - we know what happened. somehow the formatting was overwritten with a custom formatting. if you can, try UNDO'ing it until it gives you the error again. then do a CTRL+1 to see what the custom formatting it was using. once you see the custom formatting, you'll see what it's doing. paste it h... Read More
AHHHH - we know what happened. somehow the formatting was overwritten with a custom formatting. if you can, try UNDO'ing it until it gives you the error again. then do a CTRL+1 to see what the custom formatting it was using. once you see the custom formatting, you'll see what it's doing. paste it h... Read More
RE: Tangible Book Value for Insurance Companies
Well the definition of TBV is book less intangibles. Traditionally that obviously doesn't include a prepaid asset like prepaid rent for instance. So don't minus out the DAC. Remember DAC is purely a GAAP term. Note however that a common valuation metric is price / premiums sort of like enterpris... Read More
Well the definition of TBV is book less intangibles. Traditionally that obviously doesn't include a prepaid asset like prepaid rent for instance. So don't minus out the DAC. Remember DAC is purely a GAAP term. Note however that a common valuation metric is price / premiums sort of like enterpris... Read More
RE: Complex Trading: When to normalize Qs for calculating LTM?
Please see our Complex Trading Comps online course, under COST Inputs for an example of inputting quarterly information for LTM calculations. The COST Fiscal Year Yr section explains LTM fully, especially when spreading comps with different fiscal year ends.
Please see our Complex Trading Comps online course, under COST Inputs for an example of inputting quarterly information for LTM calculations. The COST Fiscal Year Yr section explains LTM fully, especially when spreading comps with different fiscal year ends.
Re: Hospital Model
Unfortunately at this time, we don't have a training module on hospitals.
Unfortunately at this time, we don't have a training module on hospitals.
RE: Stock Based Compensation
For our comparable company analysis, while all analysts seem to be submitting their EPS figures on a GAAP basis (incl. SBC), it is ambiguous as to whether they submit their EBITDA figures to consensus with or without SBC. So basically one comp has an EBITDA consensus number that is the average of EB... Read More
For our comparable company analysis, while all analysts seem to be submitting their EPS figures on a GAAP basis (incl. SBC), it is ambiguous as to whether they submit their EBITDA figures to consensus with or without SBC. So basically one comp has an EBITDA consensus number that is the average of EB... Read More
Re: LBO "Super Complex Course"
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Apologies for the delay as our reporting system was being upgraded.
We have confirmed your previous purchase and Hamilton has approved the upgrade.
Order Package 5 LBO into your shopping cart after logging in.
Please use the following discount code: hlin_approved
Thank you.
Re: Clear Content Shortcut or VBA script?
We use the old Excel 2003 menu keystrokes: Alt+E+A+A which is Edit, Clear, All We also use Alt+E+A+F which is Edit, Clear, Formatting We considered creating a macro in our WST macros but decided against it since we were running out of keystrokes and would have to use a Ctrl+Shift+Alt+[letter] whic... Read More
We use the old Excel 2003 menu keystrokes: Alt+E+A+A which is Edit, Clear, All We also use Alt+E+A+F which is Edit, Clear, Formatting We considered creating a macro in our WST macros but decided against it since we were running out of keystrokes and would have to use a Ctrl+Shift+Alt+[letter] whic... Read More
RE: Effective vs marginal tax rate for FCFF
if the marginal tax rate and the effective tax rate are similar, it really doesn't matter. normally it is marginal tax rate for everything, however, b/c this isn't an "incremental" analysis (like a merger), effective tax rate is preferred for FCFF calculations. cash taxes is the term used to ind... Read More
if the marginal tax rate and the effective tax rate are similar, it really doesn't matter. normally it is marginal tax rate for everything, however, b/c this isn't an "incremental" analysis (like a merger), effective tax rate is preferred for FCFF calculations. cash taxes is the term used to ind... Read More
If you’re doing a NAV calculation, which it looks like you are, then I would agree to use FCFE because this is the “net” cash flow after tax that the company receives. This falls under a sum-of-parts valuation in which you add up the value of each asset on an equity value basis, after the spec... If you’re doing a NAV calculation, which it looks like you are, then I would agree to use FCFE because this is the “net” cash flow after tax that the company receives. This falls under a sum-of-parts valuation in which you add up the value of each asset on an equity value basis, after the specific asset’s debt load.
FCFF as discussed in class refers to company valuation. So in that context you take the total FCFF of the entire company (which is really the sum of each asset’s FCFF, but you are getting FCFF off financial statements as opposed to each asset’s P&L) and then you apply DCF to get TEV, minus net debt, etc. If you recall I said we generally don’t like FCFE because of the ability to manipulate your net borrowings and thus, alter the value arbitrarily. However, in the case of project finance (power plants and mines for sure), the debt changes (amortization) is usually predetermined and doesn’t change, so the ability to manipulate the numbers is not there.
This is a similar concept in real estate. Value the entire company based on company cash flows vs. NAV build-up of each property after debt load per property. You are currently doing the NAV of each asset and the debt structure of these pre-existing assets won’t change or is pre-determined, so FCFE would be correct in this context. However, for DCF of entire company, you want to use FCFF for sure and then minus out net debt. Let me know if that distinction is clear. In class, we were referring to company value not per asset value.
For future projects that have not yet come online, the question of FCFE vs FCFF boils down to whether or not the debt funding is in place yet. Your concern of not taking into account debt in the future is correct – because you are supposed to. remember, it’s always FCFF, then discount to get TEV minus net debt. The ONLY time FCFE and FCFF will yield the same numbers is when the interest rate, earnings yield AND the wacc are all the same. (review the Share Repurchase video in your WST login).
So to answer your question, I would do the following for future projects: use FCFF. And then assume an average debt/capitalization ratio and subtract that out. So if your UNLEVERED value (using FCFF) is $100 and the average debt load is 30% debt/capital, you can assume $30 of debt, so equity value is $70. This is because you don’t want to get caught (trapped) making assumptions on interest rates that you don’t know yet. Otherwise, you may continue to use FCFE, but you have to assume interest rates and of course, you still need the assume debt level per project.
As I skim through you model though, I see inconsistencies in each plant though. So if I look at your EXISTING plants, sometimes you do equity value off NOPAT and then sometimes TEV off FCF and then minus net debt. Since you’re doing an NAV build-up of each plant, I would just calculate FCFE for each and discount that. add them up as you have it on NAV tab and minus out corporate/parent debt as you did. don’t double count - i.e. b/c you took out interest on per asset basis (hence FCFE), don’t include those asset specific debt that already reduced cash flow.
Let me know if that clears things up. Read More