Posts by: WST Expert 1| Wall St. Training

RE: How to value a company if we do or don't invest?
The question of current valuation with all known facts is a separate and independent issue from the capital raise in the future. Meaning that they are two disparate, unlinked events. If it is known with certainty that a capital raise two yrs later is to be done (and more importantly, the %age to be ... Read More

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by WST Expert 1.

added 11 years ago

Re: Macro partially disabled
Look for Settings or Options within the Bloomberg menu/ribbon and see if you can disable their shortcut/hotkeys. Once you do that and restart Excel, you should have all functionality of Bloomberg and our shortcut keys. If you cannot find where to disable Bloomberg's shortcut keys, we'll need to trou... Read More

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by WST Expert 1.

added 11 years ago

RE: What is the difference, if any between book tax vs GAAP tax?
GAAP requires the accrual method be used when companies create their financial statements. What you see on a company’s reported financial statement is commonly referred to as book. The pre-tax taxable income that a company reports to the IRS generally does not equate to pre-tax book (financial sta... GAAP requires the accrual method be used when companies create their financial statements. What you see on a company’s reported financial statement is commonly referred to as book. The pre-tax taxable income that a company reports to the IRS generally does not equate to pre-tax book (financial statement) income, due to both temporary differences and permanent differences. The IRS calculates taxable income on a cash basis.

The need for deferred tax accounting arises because companies often postpone (creating a deferred tax liability) or pre-pays taxes (creating a deferred tax asset) on profits pertaining to a particular period. The formal relationship (which may clarify the terms) is book income = taxable income plus/minus temporary differences ± permanent differences.

Temporary or timing differences between book vs. taxable income are due to items of revenue or expense that are recognized in one period for taxes, but in a different period for books (over the ""long run"", they cause no difference between the two incomes). The most common examples of temporary difference arise from depreciating an asset by the straight method for book (which creates lower expenses) and the accelerated method for taxes (which creates higher expenses and thus less of a tax burden). Permanent differences are differences that never reverse. An example of a permanent difference is (non- taxable) interest revenue on municipal bonds.

Temporary differences cause deferred taxes, while permanent differences cause a firm's effective income tax rate (book income tax expense ÷ pre-tax book income) to differ from the statutory tax rate.

What drives deferred tax accounting is (the changes in) the deferred tax asset and liability accounts. Deferred tax liabilities are liabilities for taxes due in the future (future cash outflow for taxes payable) on income that has already been recognized for books. In effect, although you have already recognized the income on your books, the IRS lets you pay the taxes later (due to the timing difference). Deferred tax assets are reductions in future taxes payable, because you have already paid the taxes on book income to be recognized in the future (like a prepaid tax).

Recognition of a deferred tax asset reduces future cash taxes payable and thus enhances FCF (although the asset has value only if the firm expects to pay taxes in the future).

The way it will impact your financial statements in your exaple is as follows: you should see a deferred tax asset on your balance sheet. The asset should slowly be reduced as the firm offsets cash taxes paid (book or reported taxes will be unaffected). Under cash flow from operating activities section of your cash flow statement you should see a line item called deferred income taxes. This will effectively increase you CFO and thus FCF if you are calculating FCF as FCF – CapEx by the amount of you tax savings.

The effect would be as you described - your tax cash rate (what you are actually paying) would be below your book rate (what you are reporting on your financial statments). Read More

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by WST Expert 1.

added 11 years ago

Re: debt
As of now, unfortunately we do not have our Project Finance courses available in an online format. This is only available in an on-site corporate training format.

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by WST Expert 1.

added 11 years ago

RE: Cost Accounting vs Equity Accounting
Cost Accounting - Procedures used for rationally classifying, recording, and allocating current or predicted costs that relate to a certain product or production process. translation: expenditures expensed as incurred (recorded as current period cost, immediately) refers to: recognition of expen... Read More

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by WST Expert 1.

added 11 years ago

Re: Discount rate when FCFF = FCFE
Generally, we are not advocates of using FCFE. However,the scenario you proposed effectively equates FCFF = FCFE. If that were to be the case forever, as you stated, then it doesn't matter which discount rate you would use, since weight of debt in the WACC calculation would be zero and in theory, WA... Read More

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by WST Expert 1.

added 11 years ago

Re: Enhancements to the core model- Part II EVA analysis
Yes, there is a discrepancy. Our videos had an error and incorrectly grabbed on only the Debt numbers and missed the Equity figures. The XLS template on the system is the corrected numbers. You could have verified this on your own by linking the green colored cells in the template to your actual mod... Read More

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by WST Expert 1.

added 11 years ago

Re: Discounted EVA approach
Your approach seems correct. Don't forget terminal value as well.If you're going out 25 years, then it won't have a major impact anyway. Make sure that Total Capital is Debt + Equity (preferred, etc). normally, we use book values for all. particularly important when comparing market values of equit... Read More

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by WST Expert 1.

added 11 years ago

Re: DDM is not used in practice?
Correct. DDM is only for academics and textbooks. However, as you noted, DDM is relevant for a sector number of industries, such as banks, REITs and utilities. Not necessarily because DPS is a larger % of EPS, but because they are considered dividend paying stocks in which the dividend yield matter... Read More

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by WST Expert 1.

added 11 years ago

Re: Ev calc? Inlcude postretirement liab's and pension liab's?
What is the total debt, cash and unfunded pension and opeb liabilities? Also, from what perspective are you analyzing the company? Standalone valuation (ie start with TEV and boil down to equity value and price per share, as well as vice versa, or from an m&a standpoint? Importantly, what is th... Read More

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by WST Expert 1.

added 11 years ago