Remember, with a DCF, you are attempting to map out future cash flows you receive. Thus, for the projection period, you receive FCFF which is indeed after tax, specifically taxes the corporation pays. For TV, while it is "pre-tax" since using EBITDA, if you were to sell the business, you would recei... Remember, with a DCF, you are attempting to map out future cash flows you receive. Thus, for the projection period, you receive FCFF which is indeed after tax, specifically taxes the corporation pays. For TV, while it is "pre-tax" since using EBITDA, if you were to sell the business, you would receive that amount of cash as a shareholder. The cash flows in the projection period are after CORPORATE taxes. What you receive as TV in 5 years or TEV/Equity Value today is *MAYBE* taxed as a shareholder depending on tax basis and tax status (taxable vs tax-exempt vs tax deferred, etc) and so there is no conflict or pre- vs. post-tax since for valuation purposes we don't model out Net-after-tax value. For M&A deal structuring you do, because depending on the structure and earnouts, etc, taxes will have a significant impact. Read More

Right! I see. It's all because the dcf attempts to show cash flows to ALL STAKEHOLDERS. Thus, the TV based on terminal mult will give you the value of the business to ALL STAKEHOLDERS! And to select the terminal mult: do you look at market mults or precedent m&a deal mults? Ie is the dcf a con... Right! I see. It's all because the dcf attempts to show cash flows to ALL STAKEHOLDERS. Thus, the TV based on terminal mult will give you the value of the business to ALL STAKEHOLDERS!
And to select the terminal mult: do you look at market mults or precedent m&a deal mults? Ie is the dcf a controlling interest valuation, or a minority interest valuation? Read More

Generally, dcf tv uses mkt multiples. You are valuing the company as opposed to selling it altho the premise is to value as if u r seeling (multiples) vs hold forever (perpetuity growth).

Dcf = 100% value. If minority valuation, while other world due to liquidity and minority discounts.

Thanks. that's interesting: so you're saying: (1) the terminal multiple approach assumes a sale of the company, thus implying a change of control valuation (2) the perpetuity growth terminal value approach assumes steady state, no sale of the company. Therefore, are the terminal multiple a... Thanks. that's interesting: so you're saying:

(1) the terminal multiple approach assumes a sale of the company, thus
implying a change of control valuation
(2) the perpetuity growth terminal value approach assumes steady state,
no sale of the company.

Therefore, are the terminal multiple and perpetuity growth approaches
not comparable? Read More

You run both methods (per the training) to make sure the numbers are fairly consistent. In that sense, it's comparable.

Fair enough - hence the "art not science."

Bingo. Remember our wmt discussion (via online I think) where perpetuity wasn't a great approach for wmt b/c capex didn't equal depreciation at all so not applicable since not at "true" steady growth run-rate. But u still need to run the numbers to validate or provide reason for non-importance. Also... Bingo. Remember our wmt discussion (via online I think) where perpetuity wasn't a great approach for wmt b/c capex didn't equal depreciation at all so not applicable since not at "true" steady growth run-rate. But u still need to run the numbers to validate or provide reason for non-importance. Also, that's why implied ebitda multiple and implied grwoth rate is important as well for sanity check. Read More